Introduction: Kerala’s Houseboat Industry in Troubled Waters
Kerala’s iconic houseboat industry, known for its serene backwaters, now faces a storm due to an 18% GST demand imposed retrospectively from 2017. This move has left houseboat owners, especially in Alappuzha, Kochi, and Kumarakom, in a precarious situation, with some required to pay between ₹1 crore to ₹7 crore. Stakeholders argue that this demand contradicts earlier agreements and threatens to sink this vital pillar of Kerala’s tourism industry.
Timeline of Events
- 2017 Assurance at Kerala Travel Mart: Houseboat owners were assured of a 5% GST rate by the Central GST office.
- Retrospective Demand by State GST: The Kerala GST office recently issued notices to houseboat operators, claiming 18% GST from 2017 onwards.
- Pending Resolution: Despite petitions to the state government, the issue remains unresolved, leaving operators at risk of financial collapse.
Legal and Financial Implications
- Classification Dispute:
- Before GST (Pre-2017): Houseboats were considered tour operators, taxed accordingly.
- Post-GST Era: The state GST office reclassified houseboats as water transport services, leading to the higher 18% tax rate.
- Comparison with Other States: States like Assam and West Bengal continue to charge only 5% GST on similar services.
- Retroactive Tax Demand: Operators must pay 10% of the demand upfront or face enforcement actions. This sudden liability is untenable for many small operators.
Economic Impact on Kerala Tourism
- Financial Burden: With tax demands running into crores, many operators may shut down.
- Loss of Livelihoods: The industry directly supports 1,200 houseboats and thousands of families dependent on tourism.
- Tourism Decline: Houseboats are a major attraction for domestic and international tourists. Any disruption could lead to a sharp drop in tourist inflows.
💡 What Needs to Be Done?
- Revisit Classification: Houseboats must be recognized as tour operators, similar to river cruises in other states, to retain the 5% GST rate.
- Engage Stakeholders: The Kerala government must consult houseboat operators, legal experts, and the GST Council for a practical resolution.
- Central and State Coordination: The state GST office must clarify its stance with the Central GST office to avoid contradictory interpretations.
A Fair Taxation Approach is Essential
The houseboat industry is a lifeline for Kerala’s tourism economy. Tax policies should aim to nurture, not burden, this vital sector. With proper dialogue and legal clarity, the state government can ensure fair taxation while protecting livelihoods and sustaining the state’s tourism appeal.