By Anshia Dutta
India is the second most populous nation in the world after China. Over the past few years, steady inflation rates and rising incomes have brought about an improvement in the standard of living of the citizens of the country. The tourism industry of India has grown by more than 10% in the six months ending September 2017 with the number of foreign arrivals ascending by 10.7% and foreign exchange going up by 15.1%. The industry alone employs around 40 million people and has the potential of creating job opportunities for more than 10 million people in the next decade.
Expectations from the budget
The primary reason for the rise in the number of foreign travelers to India is the facility of E-Visas. Started in December 2016, it enables tourists to get the visa online instead of having to send their passports and making trips to the embassy.
However, the implementation of GST in July 2017 made India a more expensive destination. The GST on luxury hotels is now 28%, up from 14% that was charged earlier. This move came as a disadvantage for the domestic tourists in terms of cost-effectiveness. However, it did not significantly affect the foreign tourists.
Many people in the tourism sector had certain expectations from the budget. Deep Kalra, the founder and CEO of MakeMyTrip had said, ?To compete in a global marketplace with countries like Thailand, Malaysia and Singapore in the region, India needs to offer services at par with global rates.?
Peter Kerkar, CEO of Cox and Kings Group, said in a statement, ?In order to boost domestic and inbound tourism, the government should reduce the GST, which is 18% for hotel room rates in the Rs 2,500-7,500 category. This is very high compared to competing destinations and hence it’s important to rationalize this rate to stay competitive.? He also added, ?For outbound tourism, the GST should be applicable only to services rendered in India and not on the entire Outbound Tour Package Value, he said. This increases the cost of the holiday and it is unfair to the customers as they are forced to pay taxes for services that he is not consuming in India.?
Vishal Suri, the Managing Director of SOTC Travel also had certain anticipations and he said, ?We look forward to the Union budget 2018 and anticipate that streamlining taxes in the federal budget will boost the travel and tourism sector. We expect tour operators may be given an option to pay the GST at 12% with full input tax credit in addition to existing rate at 5% without Input Tax Credit. Tax exemption benefit should be extended to the NRI Holiday business. Clarification on the flexibility of transfer and availment of the GST credit on hotels in the service providing state should be provided. Clarification on non-applicability of GST on Intra Company but interstate transactions will serve as an impetus to the Industry. Raising allocations for tourism infrastructure like new tourist trains, building roads to tourist destinations and lowering tax on hotel tariffs will be beneficial for tour operators. The launch of regional budget airlines on over 100 routes has aided domestic tourism boom, also encouraging thousands of families to explore flying for the first time.?
Pre-budget speculations
Before the budget was presented, there were many speculations regarding the budget allocation for the travel and tourism sector. There were rumors that Finance Minister Arun Jaitley was in favor of lowering the 28% tax on hotel tariffs. Secondly, a substantial rise in the allocation for tourism infrastructure and an increase in income tax exemptions on investments in new hotels were expected. In addition to this, there were conjectures about lowering the corporate tax, offering tax incentives for hotel construction, and improving connectivity to places.
Budget for the tourism industry
February 1, 2018, turned out to be quite a disappointing day for the tourism sector. The demand for a new corpus of funds for tourism was not met and no additional investment expenditure in the sector was announced.
The budget proposed to develop ten tourist sites as iconic destinations, involving infrastructure, development of technology and skills. Secondly, the government will upgrade 100 Adarsh monuments of the Archaeological Survey of India. Next, frameworks will be created to attract private investment in branding and marketing. In addition to this, the budget allocation for tourism involved improving the regional air connectivity, raising the airport capacity by five times, improvement in the rail infrastructure, and development of the suburban railway networks. The railway stations are going to have escalators. The stations and trains are going to be well-equipped with Wi-Fi facilities and CCTV cameras for enhanced security of passengers. A special scheme was also announced to address the problem of air pollution in Delhi and NCR.
A disappointing budget
While these measures have been welcomed with open arms, people working in the tourism industry feel that not much has been done to utilize its full potential. Anand Kandadai, the Executive Vice President of Cleartrip said, ?The budget has the much-needed approach to the creation of a holistic tourism infrastructure. This is evident in measures undertaken to boost land and rail connectivity, but the sector was also hopeful of hearing on boosting the digital and payment infrastructure for sectors with big-ticket transactions such as travel and a tax relief, especially on indirect taxes levied on tourism and hospitality.?
Vineet Verma, Executive Director and CEO of Brigade Hospitality Services Limited said, ?A uniform policy across India, governing hospitality and tourism including an effective single window clearance mechanism for expeditious clearance of projects would have been most appreciated.?
Featured image source: Pxhere
