Need a budget to embolden domestic tourism in India

Supportive allocation with a waiver of TCS expected

Talking about the Union Budget 2021, Vishal Suri, Managing Director, SOTC Travel commented, "We look forward to the Union Budget 2021, bringing in concrete measures that target the revival of the economy and boosting consumer sentiment/consumption. The Travel & Tourism sector is a vital contributor to the country's GDP and a significant employment generator."

Highlighting the role that domestic tourism will be playing to put things in order as far as the contribution to country's GDP and employment is concerned, Suri added, "With a focus on the domestic tourism sector in the current era of travel, there is strong potential to develop smaller cities/towns in India for tourism in line with Honourable Prime Minister's vision of being Atmanirbhar Bharat and further strengthen Make in India. This will also give a boost to local communities. We hope to see proactive reforms, supportive policies, and budgetary allocation, with an immediate waiver of TCS for the tourism sector - critical in stimulating demand."

Serious hand holding response required to reinforce the idea of Incredible India

The inbound to India has been severely impacted by the emergence of the newly discovered strain of Coronavirus. On the one hand, vaccination has been going for around a month in the US and UK; on the other hand, India's vaccination is yet to begin on January 16, 2021. 

However, the biggest apprehension that has grabbed travellers' minds is the question of safety in stepping outside. Lacking confidence has resulted in reduced mobility, thereby affecting the entire Tourism market significantly.

Discussing the current situation, Pradip Lulla, President Travel Agents Federation of India (TAFI) said, "COVID-19, the disease caused by a new strain of Coronavirus, has had a greater impact on Tourism and Travel behaviour than any disease outbreak in living memory. The nature of the Tourism System means that Tourism has both contributed to the spread of the disease and experienced the repercussions of the disease along with all parts of the tourism value and supply chains."

He mentioned the various reasons like quarantine, reduced mobility, and isolation that have led to the downfall of international and domestic tourism. He also underlined the sector-specific hindrances developed for the transport, travel, and booking Agencies, Hospitality, Restaurants, Conventions, and Events. The impact that COVID-19 has on markets, destinations, Organizations and Businesses, Consumers, Destination Communities, Transit Zones, and Tourism Transport is incomparable.

With the altered world conditions, inbound to India has been severely affected. Commenting on the same, Lulla expressed, "Since the new strain has not been researched much, the general impact on the various mentioned services will result in facing a huge scare by the inbound markets of Europe Mideast and the Far East to India. Inbound to India will continue to be impacted till the end of 2021, till confidence returns that the pax is safe, and so is the destination market."

"The Vaccine will make these same markets cause a positive impact, but by the time most receive this, it is going to be the end of 2021. There will be revenge travel impact in most tourist markets, due to the demand being restrained for 2020/21 the Travellers will want to do more in a shorter span, and Destination Markets need to be prepared to receive this kind of influx," he added.

He also suggested that the destination markets and inbound operators must find opportunities even if the conditions concerning destination management, marketing, and tourism are bleak.

Commenting on his budget expectations, he stated, "Budget must consider that this industry has had the biggest impact and needs a serious hand-holding response. Bring Funds into this industry as soft loans and grants, bring the Travel Associations to work closely with the Government to identify how these funds need to be deployed and track usage. Highlight budget usage for 2021 to each Association. Bring a Response strategy to identify India as a resilient destination and highlight business attractiveness through a PR and Marketing push of Incredible India again (funds needed here by Tourism Ministry)."

Expressing his dissent on the inaction of the Government the previous year towards the industry, he concluded, "It is, time the Government put money where their mouth is, as all this period of last year, the Government did absolutely nothing for this industry. Give a tax/GST holiday for one year to this industry. The Government should also provide grants and loans at 3-4 per cent to formulate an effective revival strategy."

Painting a Tourism scenery- Made in India

Discussing the need to rebuild India as a preferred destination for tourism, Dr. Subhash Goyal, Chairman at STIC Travel Group of companies, suggested some recommendations with the centre that he shared with us. To push India from its erstwhile 34th rank in tourism 2019 competitiveness study (conducted by WEF) to top 20 rank in five years post COVID-19 normalcy, Goyal suggested that the centre must pay attention to address matters like 'One India, One Tourism,' 'Export Competitiveness,' 'Domestic leadership,' 'Capital Formation,' and 'Removing inefficiencies.'

He has recommended the formation of the National Tourism Council chaired by the Prime Minister and co-chaired by the Tourism Minister composed of Chief Ministers of all states and cabinet ministers of the Government of India. This should be done to have a coordinated approach across all the ministries, central government levels, and center and state.

Another recommendation is to treatment of hotels and tourism across India as an industry. The lack thereof has deprived the hotels and tourism sector of producing high-quality service. Being heavy on the pocket because of high water and utility rates, inability to access uniform licenses, permits, and thereby hindering their growth. 

Goyal also believes that the Indian Tourism, travel, and hospitality sector, being a valuable sector, can increase its share of inbound tourism to 2.5 per cent in five years. He shared that it is essential to make the necessary deduction in respect of earnings in convertible foreign exchange to all the tourism and hospitality units earning. Tourism forex earnings should be effectively zero-rated for GST. He further stated that the relaxation in taxes will be transmitted to tourists and increase the country's enhanced global share. Moreover, foreign exchange linked exemption from income tax would enable the sector to reinvest in tourism infrastructure, thereby boost jobs, tax collections and augment foreign exchange.

Considering the lean tourism period wherein rebuilding the tourism sector should be a priority, Goyal also recommended the SEIS credit to be made available to the tourism industry against their foreign exchange earnings. To provide cash flow support and policy continuity, it should be applicable for the policy period of the FTP 2020-25.

While speaking about the mice sector, he said that the Global Mice Bidding Fund is estimated to be upwards of $ 800 bn and is less than one per cent. Having direct correlation with the GDP. He expressed the goal of doubling the mice share 2.5 per cent of the world in five years.

"In the global international congress associations rankings, our goal will be to take India's rank to the top 10 in the world from 28 where we are currently. We need to recognise mice tourism as a distinct business segment, and to target global congress, conventions and conferences, and social events, there is a need to create a global MICE bidding fund with a corpus of ₹ 500 crores. This will enable our entrepreneurs to undertake techno-economic bids for global events which have a bid cycle of 2 years plus," he said.

He also believes that the government can create a structured global awareness of multiple Indian tourism verticals by branding Indian MICE, Indian adventure, Indian Heritage under the Incredible India main brand. Doing so will involve a comprehensive global focus on creating segment brand ambassadors, country-wise customised content, mass and social media buying and significant creatives. He said, "Considering the significant foreign of more than $ 100 bn generated by tourism over the past years, at least ₹ 2500 crores of global branding budget must be allocated."

He also expects to assist the Indian missions abroad with the coming budget, "In the post-COVID normal, each of the Indian missions abroad in each country should be activated with tourism resources for enhancing our tourism brand and sales distribution in all countries. We need to budget for and have India tourism evenings in each of the top 100 cities of the world," he concluded.

Domestic tourism will drive Indian tourism in 2021. Making the best out of the available opportunity is what Dr. Subhash Goyal believes in. He has recommended the income tax exemption on travelling within India. 

"Indian citizens can get income tax credits for up to ₹ 1.5 lakhs when spending with GST registered domestic tour operators, travel agents, hoteliers, and transporters anywhere within the country," he said.

Given that domestic mice need to be encouraged by incentivising the Indian corporates, Goyal said that the government should offer a 200 per cent weighted income tax expense benefit to Indian companies undertaking mice events in India.

Restoring national and cultural heritage with Heritage Restoration Fund

Goyal believes that to encourage sustainable and responsible development, the government must create a heritage restoration fund and set up a corpus of at least ₹ 2000 crores. This will enable the custodians of natural & cultural heritage across the country by funding their efforts to keep our historical & geographical assets alive.

He further added that this will encourage sustainable and responsible development around each vertical of natural and cultural heritage tourism be it in Mountaineering, cruising, trekking, wildlife and reserve forests-based activities. Besides, snorkeling, paragliding, whitewater rafting, conservatories, paragliding, ballooning, desert safaris in natural heritage or in palaces, forts, monuments, museums, food, arts and crafts, historical sites, will be positively affected.

He also believes that hotels should be declared as an infrastructure sector so that long-terms are accessible at suitable interest rates to attract private capital hospitality, create all India jobs, and build quality accommodation supply.

To enable tapping of hotel land across states, a national hotel SPV is recommended on a tripartite model, enabling state governments & PSUs to pool their land assets, which can enable PPP based on lease structures and not sale. This will drive immense hospitality capital into India.

He also mentioned that the recently formed ECLGS under MOF which is administering the emergency credit guarantee fund must be used to set up a travel agent underwriting fund.

To truly ensure a seamless tourist transportation experience, a standardise all inter-State road taxes and make them payable at a single point which will facilitate the ease of doing business. The government must lay out a national Tourism transportation policy to that effect. This will boost both demand and supply of tourist transportation and boost.

GST policy alteration for tourism

He suggested some policy issues which need to be addressed for tourism GST.

GST rates for hospitality in India are one of the highest in the world. This makes both domestic and inbound tourism in India expensive. The 18 per cent GST category for hotels above room rates of ₹ 7500 must be abolished and merged with the category of 12 per cent GST.

Restaurants too have an 18 per cent and 5 per cent slab but which is without setoffs. The 18 per cent category needs to be abolished, and there needs to be an option made available of GST at 12 per cent with full setoffs. Additionally, the needs to be no linkage to room tariffs above ₹ 7500 as it currently exists.

Taxes on fuel, Inter- state transportation taxes, power cess, liquor excise, and property taxes, cess on parking charges, are very high-cost input indirect costs on tourism, travel & hospitality. These need to be made available as input costs setoffs for GST to truly make us one country, one tax.

The GST on Tour operators should be 1.8 per cent with full setoffs which is calculated as 18 per cent GST on a 10 per cent margin. Currently at 5 per cent that too without setoffs it effectively comes to 18 per cent on a 38 per cent margin which is penal.

Hotels need to levy IGST to give GST credits to Indian corporates who do Interstate events and do not take these events internationally. This will streamline the complete GST chain and boost interstate corporate mice demand for hospitality.