Service to 14.5 percent, and a luxury tax would

Service
Industry

All
services are products not all products are services.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Definition: An industry which primarily earns its
revenue to meet its expenditure by providing intangible products is called a
service industry.

Examples: Hospitality, Healthcare, Insurance, Information
Technology services, Law, Distribution business etc.

 

Hospitality
Industry

The Indian hospitality industry has come up as one of
the drivers of growth of service sector in India. Hospitality sector has
tourism which is one of the top contributor in Indian economy. India being the
land of rich heritage, variety in ecology, terrains and natural beauty, has a
untapped great potential in tourism and hospitality. It is also most promising
industry in terms of employment and GDP growth.
 It is the part of service industry which
covers nearly every industry which is concerned with the satisfaction of a
customer. The primary objective is customer’s happiness and satisfaction.

This industry relies majorly on the availability of extra
income and leisure time. Because of which majority of businesses are for
tourists, both domestic and international.

If disposable income decrease the demand for the
services provide by these industry also decreases.

 

 

 

 

 

 

 

 

 

 

 

 

Taxation
pre Goods and Service Tax

In
case of a hotel

A hotel where if the tariff would go above INR 1000
was liable for service tax at 15 percent. An abatement of 40 percent was
allowed to be brought down on the tariff rates, thus bringing the real rate of service
tax to 9 percent. The Value Added Tax, which ranges between 12 percent to 14.5
percent, and a luxury tax would apply on top of this.

In
case of a restaurant

The abatement criteria in case of restaurants was 60
percent which means that service tax was charged on top of this, hence the real
rate would come down to 6 percent on the food and beverages bills, apart from
VAT which was charged at the same rate of 12 percent to 14.5 percent was also
levied on the same.

In
case of social functions

Abatement of 30 percent was allowed.

Problem

Cascading
effect- The end user was the one who was finally liable to
pay everything as the burden of the tax was passed to it.

Industry was not getting any input tax credit on the
taxes they paid, as central like service tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

ADVANTAGES

 

Disadvantages

 

 

 

 

 

 

 

 

 

OYO Rooms

            Founded by Ritesh
Agarwal Oyo rooms is a hotel aggregator headquartered in Gurugram, Haryana. The
company was launched in the year 2012 with the name Oravel stays. Initially it
provided a website which listed and enabled people to book low cost
accommodations. This followed a marketplace type business model which was
similar to Airbnb.

The
company then changed its business model to hotel aggregation to become Oyo
rooms in the beginning of the year 2013. The aim of the company is to provide
standardised services in all the hotels present in its network at an affordable
cost. The company started its network with a single property in January 2013
and is reported to have formed a network of over 8000 properties by the end of
2017.

The
initial strategy of the company was they entered into a contract with the
hotels according to which the company hired a portion of the hotel’s rooms and
organised these rooms under the brand Oyo rooms. The service provided by the
hotels to these rooms was supposed to follow the brand standards which were set
by Oyo. In order to maintain the standard throughout all its partners the
company assists the hotels by providing them with the necessary training in
service and the supplies required. These registered rooms were supposed to be
provided for the customers who had made their bookings via the Oyo rooms
website or the mobile app.

Oyo
launched its official mobile app in the android platform on April, 2015. In
addition to booking the app also provides the user with the facilities to order
room service during the stay period, early morning check in etc. In 2016 the
company started a programme called as Oyo Flagship following which the company
started to lease entire properties such as hotels and guest houses. This led
the company to hire its own staff in these properties thus enabling them to
control the day to day operations. In June 2016 Oyo launched its own online
marketplace called Oyo Bazar. The main aim of this brand is to provide a one
stop shop for procurement of supplies which are essential for the seamless day
to day operation of hotels.  In January
2017, Oyo launched the Townhouse, a brand which was entirely operated by the
company. By the end of 2017 the company has its townhouse services in eleven
major cities in India.

 

OYO rooms before GST

            Oyo
rooms ears its revenues through a take up rate basis where the company charges
a commission to the partners of the firm when it is bringing customers. The net
take up rate is calculated as

          

            Although the company initially
started up with a negative net take up rate it managed to bring up the take up
rate to positive in the last quarter of the financial year 2016 and it has been
steadily increasing in the following quarters. In addition to this the
quarterly realised revenue of the company which has seen a steady increase has
reached a value which equals almost twelve times in the past two years.

            During
the financial year 2014-15 Oyo suffered a loss of INR 21 crores which almost
increased 25 times to INR 496 crores 
in  the next financial year with
an annual income of INR 32 crores according to business research platform
Tofler. This was mainly due to increasing expenses and investment into the
firm. However in the financial year. However Oyo was able to prune the losses
by 35 percent resulting in a loss of INR 325 Crores.

 

 

 

Impact of GST on Oyo
rooms

            Oyo
rooms has been focusing on budget hotel rooms within the price range of INR
1000- 2500 and hence they attract a tax rate of 12%. Even though this is lower
than the previous taxation in several states in states where there was an
absence of luxury tax have seen a considerable increase on the tax to be paid.
It was also mentioned by the government that the government does not consider
the discount provided by the hotel aggregators which meant that the tax which
is levied is based on the actual price of the service and not the price paid by
the customer.

            Another major issue faced by the
company was tax collection at source (TCS). GST classified the online travel
aggregators as e-commerce operators which meant that they would have to deduct
tax collection at source. As the company had to work with multiple travel
aggregators they faced some difficulty on deciding on how TCS was supposed to
be levied.

            Despite these initial complications
faced Oyo rooms have been working hard and have adapted to the new GST regime.
The company has taken several steps to give a hassle free experience to its
customers and partners. Unlike several other travel aggregators who are
charging IGST Oyo rooms registered to GSTN in 28 states across the country and
are able to charge SGST thus providing a considerable tax advantage. This can
be seen as an advantage to the small and medium scale enterprises when they
need to make hotel arrangements for their employees.

            The company used its efficient
vendor network to its advantage by providing a single vendor registration
facility to its partners. Thus when a company is getting registered with Oyo
not only they get access to its comprehensive vendor network but also they need
not face the hassle of registering to new vendors in the future as the company
would take care of all its future bookings. This facility will encourage
several properties to partner with Oyo as it greatly simplifies bookkeeping.Service
Industry

All
services are products not all products are services.

Definition: An industry which primarily earns its
revenue to meet its expenditure by providing intangible products is called a
service industry.

Examples: Hospitality, Healthcare, Insurance, Information
Technology services, Law, Distribution business etc.

 

Hospitality
Industry

The Indian hospitality industry has come up as one of
the drivers of growth of service sector in India. Hospitality sector has
tourism which is one of the top contributor in Indian economy. India being the
land of rich heritage, variety in ecology, terrains and natural beauty, has a
untapped great potential in tourism and hospitality. It is also most promising
industry in terms of employment and GDP growth.
 It is the part of service industry which
covers nearly every industry which is concerned with the satisfaction of a
customer. The primary objective is customer’s happiness and satisfaction.

This industry relies majorly on the availability of extra
income and leisure time. Because of which majority of businesses are for
tourists, both domestic and international.

If disposable income decrease the demand for the
services provide by these industry also decreases.

 

 

 

 

 

 

 

 

 

 

 

 

Taxation
pre Goods and Service Tax

In
case of a hotel

A hotel where if the tariff would go above INR 1000
was liable for service tax at 15 percent. An abatement of 40 percent was
allowed to be brought down on the tariff rates, thus bringing the real rate of service
tax to 9 percent. The Value Added Tax, which ranges between 12 percent to 14.5
percent, and a luxury tax would apply on top of this.

In
case of a restaurant

The abatement criteria in case of restaurants was 60
percent which means that service tax was charged on top of this, hence the real
rate would come down to 6 percent on the food and beverages bills, apart from
VAT which was charged at the same rate of 12 percent to 14.5 percent was also
levied on the same.

In
case of social functions

Abatement of 30 percent was allowed.

Problem

Cascading
effect- The end user was the one who was finally liable to
pay everything as the burden of the tax was passed to it.

Industry was not getting any input tax credit on the
taxes they paid, as central like service tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

ADVANTAGES

 

Disadvantages

 

 

 

 

 

 

 

 

 

OYO Rooms

            Founded by Ritesh
Agarwal Oyo rooms is a hotel aggregator headquartered in Gurugram, Haryana. The
company was launched in the year 2012 with the name Oravel stays. Initially it
provided a website which listed and enabled people to book low cost
accommodations. This followed a marketplace type business model which was
similar to Airbnb.

The
company then changed its business model to hotel aggregation to become Oyo
rooms in the beginning of the year 2013. The aim of the company is to provide
standardised services in all the hotels present in its network at an affordable
cost. The company started its network with a single property in January 2013
and is reported to have formed a network of over 8000 properties by the end of
2017.

The
initial strategy of the company was they entered into a contract with the
hotels according to which the company hired a portion of the hotel’s rooms and
organised these rooms under the brand Oyo rooms. The service provided by the
hotels to these rooms was supposed to follow the brand standards which were set
by Oyo. In order to maintain the standard throughout all its partners the
company assists the hotels by providing them with the necessary training in
service and the supplies required. These registered rooms were supposed to be
provided for the customers who had made their bookings via the Oyo rooms
website or the mobile app.

Oyo
launched its official mobile app in the android platform on April, 2015. In
addition to booking the app also provides the user with the facilities to order
room service during the stay period, early morning check in etc. In 2016 the
company started a programme called as Oyo Flagship following which the company
started to lease entire properties such as hotels and guest houses. This led
the company to hire its own staff in these properties thus enabling them to
control the day to day operations. In June 2016 Oyo launched its own online
marketplace called Oyo Bazar. The main aim of this brand is to provide a one
stop shop for procurement of supplies which are essential for the seamless day
to day operation of hotels.  In January
2017, Oyo launched the Townhouse, a brand which was entirely operated by the
company. By the end of 2017 the company has its townhouse services in eleven
major cities in India.

 

OYO rooms before GST

            Oyo
rooms ears its revenues through a take up rate basis where the company charges
a commission to the partners of the firm when it is bringing customers. The net
take up rate is calculated as

          

            Although the company initially
started up with a negative net take up rate it managed to bring up the take up
rate to positive in the last quarter of the financial year 2016 and it has been
steadily increasing in the following quarters. In addition to this the
quarterly realised revenue of the company which has seen a steady increase has
reached a value which equals almost twelve times in the past two years.

            During
the financial year 2014-15 Oyo suffered a loss of INR 21 crores which almost
increased 25 times to INR 496 crores 
in  the next financial year with
an annual income of INR 32 crores according to business research platform
Tofler. This was mainly due to increasing expenses and investment into the
firm. However in the financial year. However Oyo was able to prune the losses
by 35 percent resulting in a loss of INR 325 Crores.

 

 

 

Impact of GST on Oyo
rooms

            Oyo
rooms has been focusing on budget hotel rooms within the price range of INR
1000- 2500 and hence they attract a tax rate of 12%. Even though this is lower
than the previous taxation in several states in states where there was an
absence of luxury tax have seen a considerable increase on the tax to be paid.
It was also mentioned by the government that the government does not consider
the discount provided by the hotel aggregators which meant that the tax which
is levied is based on the actual price of the service and not the price paid by
the customer.

            Another major issue faced by the
company was tax collection at source (TCS). GST classified the online travel
aggregators as e-commerce operators which meant that they would have to deduct
tax collection at source. As the company had to work with multiple travel
aggregators they faced some difficulty on deciding on how TCS was supposed to
be levied.

            Despite these initial complications
faced Oyo rooms have been working hard and have adapted to the new GST regime.
The company has taken several steps to give a hassle free experience to its
customers and partners. Unlike several other travel aggregators who are
charging IGST Oyo rooms registered to GSTN in 28 states across the country and
are able to charge SGST thus providing a considerable tax advantage. This can
be seen as an advantage to the small and medium scale enterprises when they
need to make hotel arrangements for their employees.

            The company used its efficient
vendor network to its advantage by providing a single vendor registration
facility to its partners. Thus when a company is getting registered with Oyo
not only they get access to its comprehensive vendor network but also they need
not face the hassle of registering to new vendors in the future as the company
would take care of all its future booService
Industry

All
services are products not all products are services.

Definition: An industry which primarily earns its
revenue to meet its expenditure by providing intangible products is called a
service industry.

Examples: Hospitality, Healthcare, Insurance, Information
Technology services, Law, Distribution business etc.

 

Hospitality
Industry

The Indian hospitality industry has come up as one of
the drivers of growth of service sector in India. Hospitality sector has
tourism which is one of the top contributor in Indian economy. India being the
land of rich heritage, variety in ecology, terrains and natural beauty, has a
untapped great potential in tourism and hospitality. It is also most promising
industry in terms of employment and GDP growth.
 It is the part of service industry which
covers nearly every industry which is concerned with the satisfaction of a
customer. The primary objective is customer’s happiness and satisfaction.

This industry relies majorly on the availability of extra
income and leisure time. Because of which majority of businesses are for
tourists, both domestic and international.

If disposable income decrease the demand for the
services provide by these industry also decreases.

 

 

 

 

 

 

 

 

 

 

 

 

Taxation
pre Goods and Service Tax

In
case of a hotel

A hotel where if the tariff would go above INR 1000
was liable for service tax at 15 percent. An abatement of 40 percent was
allowed to be brought down on the tariff rates, thus bringing the real rate of service
tax to 9 percent. The Value Added Tax, which ranges between 12 percent to 14.5
percent, and a luxury tax would apply on top of this.

In
case of a restaurant

The abatement criteria in case of restaurants was 60
percent which means that service tax was charged on top of this, hence the real
rate would come down to 6 percent on the food and beverages bills, apart from
VAT which was charged at the same rate of 12 percent to 14.5 percent was also
levied on the same.

In
case of social functions

Abatement of 30 percent was allowed.

Problem

Cascading
effect- The end user was the one who was finally liable to
pay everything as the burden of the tax was passed to it.

Industry was not getting any input tax credit on the
taxes they paid, as central like service tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

ADVANTAGES

 

Disadvantages

 

 

 

 

 

 

 

 

 

OYO Rooms

            Founded by Ritesh
Agarwal Oyo rooms is a hotel aggregator headquartered in Gurugram, Haryana. The
company was launched in the year 2012 with the name Oravel stays. Initially it
provided a website which listed and enabled people to book low cost
accommodations. This followed a marketplace type business model which was
similar to Airbnb.

The
company then changed its business model to hotel aggregation to become Oyo
rooms in the beginning of the year 2013. The aim of the company is to provide
standardised services in all the hotels present in its network at an affordable
cost. The company started its network with a single property in January 2013
and is reported to have formed a network of over 8000 properties by the end of
2017.

The
initial strategy of the company was they entered into a contract with the
hotels according to which the company hired a portion of the hotel’s rooms and
organised these rooms under the brand Oyo rooms. The service provided by the
hotels to these rooms was supposed to follow the brand standards which were set
by Oyo. In order to maintain the standard throughout all its partners the
company assists the hotels by providing them with the necessary training in
service and the supplies required. These registered rooms were supposed to be
provided for the customers who had made their bookings via the Oyo rooms
website or the mobile app.

Oyo
launched its official mobile app in the android platform on April, 2015. In
addition to booking the app also provides the user with the facilities to order
room service during the stay period, early morning check in etc. In 2016 the
company started a programme called as Oyo Flagship following which the company
started to lease entire properties such as hotels and guest houses. This led
the company to hire its own staff in these properties thus enabling them to
control the day to day operations. In June 2016 Oyo launched its own online
marketplace called Oyo Bazar. The main aim of this brand is to provide a one
stop shop for procurement of supplies which are essential for the seamless day
to day operation of hotels.  In January
2017, Oyo launched the Townhouse, a brand which was entirely operated by the
company. By the end of 2017 the company has its townhouse services in eleven
major cities in India.

 

OYO rooms before GST

            Oyo
rooms ears its revenues through a take up rate basis where the company charges
a commission to the partners of the firm when it is bringing customers. The net
take up rate is calculated as

          

            Although the company initially
started up with a negative net take up rate it managed to bring up the take up
rate to positive in the last quarter of the financial year 2016 and it has been
steadily increasing in the following quarters. In addition to this the
quarterly realised revenue of the company which has seen a steady increase has
reached a value which equals almost twelve times in the past two years.

            During
the financial year 2014-15 Oyo suffered a loss of INR 21 crores which almost
increased 25 times to INR 496 crores 
in  the next financial year with
an annual income of INR 32 crores according to business research platform
Tofler. This was mainly due to increasing expenses and investment into the
firm. However in the financial year. However Oyo was able to prune the losses
by 35 percent resulting in a loss of INR 325 Crores.

 

 

 

Impact of GST on Oyo
rooms

            Oyo
rooms has been focusing on budget hotel rooms within the price range of INR
1000- 2500 and hence they attract a tax rate of 12%. Even though this is lower
than the previous taxation in several states in states where there was an
absence of luxury tax have seen a considerable increase on the tax to be paid.
It was also mentioned by the government that the government does not consider
the discount provided by the hotel aggregators which meant that the tax which
is levied is based on the actual price of the service and not the price paid by
the customer.

            Another major issue faced by the
company was tax collection at source (TCS). GST classified the online travel
aggregators as e-commerce operators which meant that they would have to deduct
tax collection at source. As the company had to work with multiple travel
aggregators they faced some difficulty on deciding on how TCS was supposed to
be levied.

            Despite these initial complications
faced Oyo rooms have been working hard and have adapted to the new GST regime.
The company has taken several steps to give a hassle free experience to its
customers and partners. Unlike several other travel aggregators who are
charging IGST Oyo rooms registered to GSTN in 28 states across the country and
are able to charge SGST thus providing a considerable tax advantage. This can
be seen as an advantage to the small and medium scale enterprises when they
need to make hotel arrangements for their employees.

            The company used its efficient
vendor network to its advantage by providing a single vendor registration
facility to its partners. Thus when a company is getting registered with Oyo
not only they get access to its comprehensive vendor network but also they need
not face the hassle of registering to new vendors in the future as the company
would take care of all its future bookings. This facility will encourage
several properties to partner with Oyo as it greatly simplifies bookkeeping.kings. This facility will encourage
several properties to partner with Oyo as it greatly simplifies bookkeeping.