Saudi Arabia has begin move to impose 5% Tax on each and every hajj services and products. This was made know recently by Indonesia, Religious Affairs Minister Lukman Hakim Saifuddin.
According to Lukman, Saudi Arabia will impose the 5 percent tax for products and services for its citizens and foreign citizens. “Every product, food, and beverage, services, all kinds of retributions will be imposed a 5 percent tax, which includes Umrah and Hajj pilgrimage,” said Lukman at the Presidential Palace on Wednesday, January 3.
According to the reports published tempco.co “Saudi Arabia was forced to take this step considering the continuously weakening price of oil, which has been the country’s most predominant income.”
Minister Lukman predicts that the cost of a hajj pilgrimage will increase no more than 5 percent.
The main purpose of VAT in any nation is to deploy it towards the development of government systems like education, healthcare and other services. Although VAT will apply to most goods and services there are some likely exceptions: this includes basic food items, essential medicines and exports of goods and international services which are expected to be zero rated supplies. Furthermore, other supplies such as healthcare, education, sale or lease of residential property and finance and insurance are expected to be exempt from VAT.
In Saudi Arabia the implementation of VAT will increase the prices of commodities not only for the civilians but also for travelers. Which means that the hotel prices will also rise due to these taxes. This in turn will have an impact on the Umrah and Hajj packages offered foreign countries due to an increase in the hotel prices.
There are also reports that those who has performed hajj in the last five years may have to pay 2,000 Saudi Riyals in addition to their respective countries hajj packages if they want to perform hajj in 2018.
However, we hope that like many other developed nations VAT on spending above $200 are returned to travelers and the extra fee over Umrah is waived for increased accessibility.