Implications of hike in service tax on Business Travelers
Increase of service tax from 12.36% to 14% is currently a hot topic of discussions, especially for business travelers whose traveling cost increased by almost 2% due to the hike. To explore diverse business opportunities traveling became a vital part of organizations. A major percentage of expenses incurred by the organization are for their business travelers, which include cab, flight and hotel booking, food at restaurant, special tour services, etc. Besides these the organizations have also to spend on other services like mobile services, banking services, insurance, entertainment and real estate, etc. So with the increase in service tax, increase in travel expenses is inevitable.
Let us consider, the yearly business travel spend for an organization is 10 Lakhs. Based on different research, the percentage of spending under different travel spending categories are listed here.
Total business travel expense yearly (in INR): 1000000
In the table, it is clearly visible that the elevating service tax rate will have a major effect on business class airfare in financial year 2014-15 compared to 2015-16. In order to control travel spend, an organization with the maximum percentage of business class air booking need to be more cautious. Also, among all the categories, spending percentage is highest in Hotel booking.
So the biggest challenge today for the organizations in India is to manage their inevitable T&E expenses efficiently and more productively.
The solution to deal with the service tax hike....
Business travel consists of various categories like air, hotel, car, rail and others. The best way to control travel expenses is to categorize them and to keep a track of each category spendings. Proper record of categorized expenses can be accessed at the time of need without creating unnecessary confusions.
The budget and policies for various T&E, must be set appropriately and the policy compliance with the each expense category has to be ensured by the organizations. The employees must know, whether their expenses are coming under the approved budget or not and so they can make their expenses accordingly.
The quick approval, booking and reimbursement for air travel and business trips can save the organizational cost incredibly without degrading the comfort of business travelers. A quick process can always be a motivating factor for employees and hence increase the productivity and also a way to make them an active member of organization cost cutting.
Most importantly, the tracking of all the expenses of the employees as soon as those took place can help the business organizations to reduce their expenses.
To deal with the elevating service tax, upgradation from a manual process to a web based expense management solution can be a smart move for the business traveler and the organizations. Web based expense management solution with its inbuilt customized features makes the expense management an easy and happy process for the organization in a more organized way. So, an automated expense management solution can be a new modern weapon for organizations to face the challenges of increasing travel requirements and the elevating Service Tax.