For most SMEs, Travel and Expense (T&E) of employees forms the second largest chunk of expenditure, after salaries and benefits. Some of the typical ways in which the companies have tried to control this expenditure is by reducing travel, or opting for cheaper options for stay and travel. While reducing travel does not have a positive impact on business, opting for cheaper places to stay and using low-cost mediums of transport leads to an unsatisfactory employee experience, both of which can be detrimental to business. With the launch of GST, for the very first time, Indian SMEs have the chance of conveniently receiving credit on a big part of their T&E spending, hence making up for some of that cost.
How the Process Works
The person applying GST on a bill is responsible for crediting the buyers’ GST account with the credits. Let’s understand this with an example. If a corporate books a hotel with MakeMyTrip, we will pass the GST details of the company during the booking to the hotelier. When the hotel creates the bill, GST details of the company would be incorporated on the invoice which would ensure that the tax charged on the invoice will be uploaded by them against the company’s GST account. Also, against the convenience fee charged by MMT, the company will be able to claim GST benefits as well.
Is Your Provider GST Compliant or GST Ready?
There is a big difference between being GST ready and GST compliant. A number of OTAs in the industry are now claiming that they are GST compliant. But that does not automatically mean that they are GST ready. Compliance just means putting the right tax slabs on the invoice, with the correct rates. If the company’s GST number has not been passed to the supplier, even though the invoice generated by the OTA will have the company’s GST number, there will not be any credit reaching the company’s GST account from the supplier. The company will receive the GST credit only on the fee levied by the OTA, but will miss out on the bigger chunk which would otherwise come from the supplier. Following the entire process, where the company receives the GST amount both from the supplier as well as the OTA makes the provider GST ready. So the next time, you are availing the services of an OTA or a travel agent, make sure they are GST ready.
What Should SMEs Do?
Up until now, SMEs have been working on a distributed model where most corporate travel bookings are either processed via offline agents or are individually done by employees. This system becomes obsolete with the introduction of GST. If an SME wants to claim all the benefits of the new taxation regime, they need to make the big move from offline to online and understand the system. With the complexity involved in the working of the credit system, the best solution is to embrace a self-booking tool. An intelligent self-booking tool will keep the booking flexibility with the traveller but keep the expenditure control with the organization. With such streamlining of the process, a company stands the chance to make a neat saving of up to 18% of their T&E treasure.
Why Adopt a Self-Booking Tool?
With the implementation of GST, the tax slabs for flights and hotels have changed. When looking at credit earning for flights, irrespective of the location of the company, credit can be gained on bookings using IGST. For hotels however, the company should have the GST registration in the same state as the hotel, to claim the benefits of CGST and SGST. A smart tool will not only make sure that GST benefits are being claimed on all bookings, irrespective of whether they are being made by employees or by an office administrator, it will also intelligently serve up the right state-wise GST numbers available for the company to ensure maximum benefits; something that is impossible to implement at an individual level within SMEs.
The Market of Self-Booking Tools
The market dynamics are changing. From being too small a segment to be serviced by the industry leaders, now 1 million standalone SME corporates are contributing to 70% of the flourishing Indian corporate travel business, standing at a whopping USD 30 billion per year. And yet, no strong market player is focused on servicing their travel needs.
To address this flourishing SMEs corporate business, MakeMyTrip has launched myBiz. myBiz offers are coupled with awesome advantages such as free cancellations, date changes, free meals and seat selection on air and much more. They also facilitate privileged pricing and add-ons with hotel stays as well.
To make the most of the new travel reforms, the best bet for SMEs is to get on the online wagon and consolidate their T&E function with an intelligent self-booking tool. The hurdle of its implementation will be greatly eclipsed by the ease of use and the rewards garnered along the way.
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