Big blow to the travel sector as government redirects LTC funds to consumer goods
Finance Minister Nirmala Sitharaman made a slew of announcements very recently to stimulate consumer spending and capital expenditure. They included a special LTC cash voucher, a special festival advance scheme, and interest-free loans to states for capital expenditure. However, the travel fraternity is not impressed with the LTC announcement as this move will act as a deterrent for the tourism sector which was pinning its hope on the revival of business during the festival season when people look to travel to their home states.
Sitharaman said that the LTC funds could be used to spend on goods and items in 12 per cent GST category i.e. the government would give cash to employees in lieu of the LTC ticket fare component for buying items attracting 12 per cent or more GST. LTC stands for leave travel concession. The announcement has come as an employee is not in a position to travel anywhere in India to avail the benefit of LTC/LTA in the current block of 2018-2021 due to the coronavirus pandemic.
The tourism sector has termed Finance Minister‘s cash-for-LTC announcement a ‘major blow’ to the sector. The Federation of Associations in Indian Tourism & Hospitality, the policy federation of all the national associations representing the complete tourism, travel and hospitality industry of India (ADTOI, ATOAI, FHRAI, HAI, IATO, ICPB, IHHA, ITTA, TAAI, TAFI) expressed disappointment for the Indian Travel and Tourism Industry that LTC funds of government employees are being redirected to buy consumer goods.
After almost eight months of nil to limited tourism activity, the festival season was expected to be one of the few demand drivers when people look to travel to their home state. The industry was hoping for more tax-based stimulus in the hands of all citizens to travel when spent against GST-rated travel agents, hotel tour operators, tourist transporters and restaurants. Redirecting the LTC money of government employees to buy consumer goods will dry up those funds for the travel sector.
Since this is a 4-year block scheme, it will also cut away funds for future travel demand source for the next year when the LTC block ends in 2021. This thus goes against the spirit of domestic tourism push and the year 2021 as domestic tourism year being planned by the tourism ministry.
Additionally, the way states are being extended tax-free funds payable over 50 years, the tourism industry which is the most stressed currently and also the most employee intensive be given similar taxfree funds on a direct benefit transfer for salaries and operating costs payable over 10 years post COVID.
Expressing their disappointment, the Federation of Associations in Indian Tourism & Hospitality (FAITH), said, “The LTC announcement will send a vote of no confidence to the tourism travel and hospitality industry which was looking to get back on its feet after ‘Unlock’. It is requested that not only the LTC funds be restored but also an income tax benefit be introduced for all citizens to get income tax exemption while travelling within India up to Rs 1.5 lakhs against GST registered travel agents, hotels tour operators, tourist transporters and restaurants.”
Jyoti Mayal, President, TAAI, said, “The government’s move is contrary to our suggestions where we demanded that LTAs be used to incentivise travel. But the government’s announcement will discourage travel as even those who have savings would like to en-cash their LTAs. The Tourism industry instead of being bailed out is now deprived of the LTC fund. Our Industry is dying and our employees are losing jobs in every avenue but our own Prime Minister has forgotten our existence, the backbone of India. This LTC funds should have been utilised in the ‘Dekho Apna Desh’ by which the Prime Minister Vision would have been achieved. While many countries are getting second bailouts, we are yet to get our first one.”
“LTC scheme should be utilised only for travel and should not be used for other consumables,” said Pradip Lulla, President, Travel Agents Federation of India (TAFI)
Rajesh Arya, Vice President, Association of Domestic Tour Operators of India (ADTOI) said, “In the absence of a bailout package, scores of tour operators have been forced to close their operations. The present crisis is unprecedented in the history of travel, which has impacted the sentiments of people to travel. We were expecting some positive steps from the government to support the industry. However, we are once again disappointed.”