Union Budget 2021: Nirmala Sitharaman should provide tax relief so tourists can spend more

Clean and safe heritage and leisure destinations are need of the hour

Rajat Mahajan and Devina Bajaj January 31, 2021 00:45:07 IST
Union Budget 2021: Nirmala Sitharaman should provide tax relief so tourists can spend more

Union finance minister Nirmala Sitharaman. ANI

Tourism and travel are among the largest sectors in the country contributing 8-9 percent to India’s Gross Domestic Product (GDP) and is responsible for 8 percent of direct and indirect jobs creation. However, the sector possibly saw its lowest ebb due to the lockdown enforced by coronavirus pandemic. The entire industry had to endure difficult times to bear fixed expenses without having any corresponding revenue sources. However, the enterprising Indian traveller managed to break away from the inertia-led anxiety and has started to travel on the back of short-term savings coupled with cheaper EMIs during the recent festival seasons. This pent-up demand has caused a significant uptick in the sector.

The hospitality ecosystem, i.e. hotels, resorts, holiday homes, travel agents, online travel agencies (OTAs), restaurants, etc is keeping fingers crossed on these positive trends. Even though the sector is recovering from a near-complete shutdown, the headwinds due to COVID-19 remain strong. While reports show that the year-on-year occupancy has dropped by 60 percent in India, the sector is showing early signs of recovery. Occupancy is improving month-on-month by around 10-12 percent driven by the gradual revival of domestic leisure travel in the country.

In order to sustain this momentum and provide relief to the industry, representatives of tourism and the hospitality industry have made several recommendations to the government. Suggestions from several industry bodies have gone to the government; a few are being summarised below

  • Bring tourism under the ‘concurrent list’ by amending Schedule VII of the Constitution
  • Defer renewals periods for all permits, licenses, bank guarantees and security deposits across the tourism, travel, hospitality and aviation industry for twelve months
  • Exempt payment of electricity duty, reduce 50 percent in connected load charges, reduce rates on gas and water charges
  • Implement tax reliefs and measures such as GST exemption on export earning, MAT waiver, IT credits, raising threshold limit of GST on room tariffs

The government has a crucial task this year as the expectations will be high. On the one hand, there is a dire need to fuel demand by incentivising travellers, supporting the tourism ecosystem; and on the other hand the need to institute measures to exercise caution given it may take a significant part of this year for vaccines to reach most Indians. The Budget should strike a balance between immediate reliefs and provide for long-term fixes for tourism.

  • It is important that the government provides tax reliefs thus putting money in the hands of customers. Most of the Rs 26 million high spending Indian travellers who frequented international locations will choose domestic outings this year. The large base of domestic tourists will be incentivised to spend.
  • Clean and safe heritage and leisure destinations are need of the hour. Support is needed to develop tourism and cultural locations across the country. The Centre and state-level initiatives around health, safety and sanitation must reinforce initiatives under Swachh Bharat Abhiyan and Atmanirbhar Bharat. Subscription-based Health, Safety and sanitation Index (on the lines of star category) must be set up for various tourist locations, hotels, and travel/mobility providers. This index could be used to extend the necessary benefits to the ecosystem players.
  • Access providers for travel and mobility –airlines, trains, road, infra, water transport. Continued time-bound budgetary outlay for long-term impact via infrastructure development, with new update to initiatives like Regional Connectivity Scheme (RCS) or UDAN (UdeDeshkaAamNagrik)
  • Stay and services hotels, holiday homes, hostels, camps, cruises, tour operators, restaurants, catering, clubs, shopping malls, OTAs etc. Providing instant support to ecosystem players who own or operate travel inventory and provide services. Areas like threshold limits of GST, MAT waiver, defer or partially waived statutory levies like taxes, power, water and availability of soft loans should be looked at.

The expectations of the industry are not misplaced. If fulfilled, it will not only help alleviate the pain that has been inflicted on the sector due to the onset of COVID-19 but it would also help the travel and tourism sector in India to grow. The government can use this time to even disrupt the sector by driving agendas under Digital India programs like Digital identification and passport, Artificial Intelligence-based tourist interactions, Integrated Payment solutions and many more. This will show the long-term commitment towards the sector and create a robust platform for startups to evolve over time.

The writer is Partner, Deloitte India, and Devina Bajaj, Consultant, Deloitte India

Updated Date:

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