Implications of hike in service tax on business travelers


Implications of hike in service tax on business travelers

The service tax for business travel, which went from 12.36% to 14%, has been a topic of heated discussion in corporate circles. This is because the hike in service tax will raise the price of flights, cabs, hotels, and food, which are all unavoidable when it comes to business travel.

How rising services taxes will take a toll on your company’s balance sheet

Here is an easy-to-understand representation of the extent to which your company will get affected. Imagine you spend 10 Lakhs/ 13,613.78 United States Dollar on yearly business travel.  The following table lays out what the impact on your expenses will be under the new tax regime.

Financial Year  2014 – 152015 – 16
CategoriesSpending %AmountService Tax (12.36%)Service Tax (14%)
Air(Economy class)24.4924490012107.85613714.4
Air(Business class)15.51550007663.213020
Hotel(Premium with food)25.5925590022140.4685078.2
Hotel(Guest house, residential)12.061206008943.63610130.4
Total spending includes service tax (In INR)1060488.6041072854.6
Increase in travel spending per year (In INR)12365.996 

From the table, you can see how a rise in the service tax will affect airfare for business class flights. Moreover, increases in hotel prices will set your company back by thousands of dollars in the long run if left unmanaged.

This means that managing T&E is the biggest challenge facing companies across the world.

What can be done about the rising T&E?

Here are a few things to do to mitigate the effect of the rise in service tax. The following steps will help you bring down your T&E greatly.

  • Automate your expense reporting to save your employee’s time.
  • Automate expense tracking to cut down on the time and money wasted to manually track each expense.
  • Ensure better policy compliance in expense reporting.
  • Make every employee aware of the budget limitations and the company policy on spending so that money is not wasted.
  • Ensure quicker approval, booking, and reimbursement for air travel and business trips.


Want to reduce the burden of increased service tax? You can opt for a web-based expense management solution that will save money for you when it comes to business travel expenses.

For this purpose, we have created ExpenseOut, with its myriad inbuilt customized features that allow you to make expense management an easy and happy process.

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