Strong demand for GST reform
Ahead of the upcoming Union Budget 2018-19, the trade demands a higher budget allocation for infrastructure and hopes for GST reforms to ease day-to-day business of tour operators and hotels.
We expect a higher budget allocation for the tourism sector to undertake extensive promotional activities, develop and promote new destinations. Relief in GST for tourism is awaited as per the recommendations of FAITH. Previously, the government had promised to recognise five tourism zones which are yet to be launched. The government needs to encourage private investment by giving attractive subsidies to investors for infrastructure development and employment generation. Under 'Dekho Apna Desh' campaign, the government should focus on domestic sector by allowing tax free tours.
I wish the corporate tax structure is further rationalised for the MSME, since the GST system is well in place. The government should look at giving us ‘ Industry’ status and offer incentives to companies which are regular tax payers and in the highest tax slab. There is inconsistency in regulations between and the Centre and State for tourism. We need a simpler Centredriven initiative to bring all states on a common platform to further the government’s objective of ease of doing business. The overall taxation on tourism and hospitality sectors need to be restructured and lowered so as to stimulate growth and make India competitive.
TAAI sits on the board of FAITH (Federation of Associations in Indian Tourism & Hospitality). We were invited to attend the pre-budget meeting on December 6 with the Finance Minister, where we raised several points such as export status for tourism, IGST unlocking for hotels, B2B credit for tour operators, etc. For IGST and export status, they have recommended approaching the law team of GST. Credit for tour operators and 18 per cent on rides is done in the GST council meeting. TAAI has also requested to make aviation a more transparent industry and recognise agents as principals. We will definitely be recognised as an industry.
We want that for tourism, the cascading effect of GST should be controlled. The five per cent tax levied on the entire package along with individual services in the package, which are taxed separately, should be done away with. This is making the package costlier for the customer. Secondly, tourism should have same exemptions as export business. On exports and services in tourism, the GST exemption should be the same, because GST is supposed to be one tax, which is not the case. When foreigners are taking services against foreign exchange GST is levied but for goods sold abroad there should be no GST.
GST is hailed as the biggest tax reform of India. The implementation fo this tax structure caused disruption initially, but it is gradually settling down. I feel that still there is enough space to reduce the corporate tax to encourage and enthuse the corporate sector to work hard and earn due returns. If the corporate landscape is cultivated and supported with reduced corporate taxation, more business would come up increasing the revenue to the government. It is time to make the GST regime more reasonable, for which the GST council has to be mobilised.
We are quite optimistic that this year’s Union Budget will focus on tourism sector as the government is keen to generate employment and increase revenue. We are grateful to the GST Council for allowing input credit to tour operators who are buying products from other tour operators on the lowest slab of 5 per cent. However, if the government really wants to help the tourism industry then they must exempt services provided to foreign tourist based on the foreign exchange earnings because whatever tax the government charges to foreign tourists it amounts to exporting of taxes.
India is planning to cut taxes on travel and tourism in the Budget to boost domestic tourism. In an age of strong competition from global destinations, tax rates should be on par with global standards to inject viability into the sector. The uniformity of taxes across states is also vital in this context. The budget is also expected to significantly raise allocations for tourism infrastructure and raise income tax exemptions on investments in new hotels. This shall incorporate lower income tax on corporate profit, offer tax incentives on hotel construction and allocate more funds for new tourist trains and building roads to tourist destinations.
To encourage domestic MICE, five per cent corporate tax reduction should be announced for companies conducting their annual meets, staff meets, etc. in India. Incentives/ income tax reduction needs to be given for corporate companies conducting meetings in India. We expect lowering of 28 per cent GST to 18 per cent on hotels charging tariff of ` 7500. There is a need to enhance the Incredible India website to feature among the world’s top 10 popular websites. The Government needs to encourage tour operators to remain in business by giving lowest tax slabs and incentives. The present multiple GST system in B2B and B2C segment needs to be removed.
The Indian travel packages have become expensive with GST and are unable to compete with the prices of holiday packages offered by other countries. Currently, we have to pay around 30 per cent tax for an Indian package whereas only 10 per cent tax is payable for Singapore and Thailand. This difference in GST tax structure is hampering steady business flow. A large chunk of hoteliers and service providers are still not under the purview of the new tax scheme. Besides, we need more rooms in various destinations to generate more business even on the domestic tourism front.
Tourism has mostly survived on the dynamism of entrepreneurs who have strived to make the industry the second largest in the country today. However, the government does have a big role to play in promoting the industry and giving it that extra push to help make it the largest in the country. As the government gets ready to place the Union Budget, we, the stakeholders in the tourism industry look forward to a positive budget mostly in terms of cutting down of taxes, making GST minimal, increasing investments for promotion and building infrastructure. With taxes getting minimised the industry will receive a big boost to strive forward in generating more employment.
Some of the expectations from the upcoming Budget invlove inbound tourism sector generating foreign exchange reserves should be treated on par with export of services and hence, should be exempted from GST. There is a need for stricter laws and budget allocation for protection of archeological sites and monument; higher budget allocation for Swachh Bharat and better implementation; support for better and adequate tourism infrastructure; more budgetary allocation for provision of tourist police and its effective implementation; stricter laws required for unregulated tourism activities at several tourist spots.
The current tax system is going through a major change by implementation of GST and merging all taxes. However, the implementation and efiling is not in proper order. It should be more flexible and tax-payee friendly. It would be better to simplify the procedure to get revenue for the country. My expectation from the Finance Ministry this year is that he considers relaxing road tax, give more incentives to tourists, and simplify getting permits. They should lay more emphasis on better accommodation at touristic places, connectivity, hygiene, security, etc. for more inflow of tourists.
We are looking forward to reforms supporting the industry. While the government is aggressively marketing brand India globally, it is imperative to focus internally and address issues around taxation, infrastructure and inconsistent regulations imposed by various states to achieve the potential of these industries. We also hope the Union Budget will empower each of the industries to take full advantage of varied opportunities ahead. The industry’s dependence upon technology is growing to improve efficiency, accelerate profitability. We expect Global Distribution Systems to become more deeply embedded across these sectors.
It will be exciting to watch the first Union Budget post the GST rollout. Much has been in news about the government’s special provisions towards the fast-growing tourism sector in this budget. It can further boost investment and employment opportunities, thus creating more avenues for SME start-ups like ours. I would be happy to see these specific measures apart from general declarations such as further simplification and rationalisation of GST slabs and rates, incentives on digital payments, and lowering of tax slabs in hotels and other tourism-related services within India to boost domestic tourism.
I expect the government this year to make substantial budget allocation to update current tourism assets as well as create new ones. It must consider cutting taxes on travel and tourism products, thereby giving impetus to domestic tourism growth. Hopeful, the government will relook at personal income tax slabs as well, so that people have more money to spend and they travel more.
My expectations from this year’s Budget are very high. However, the top-most relief expected for travel and tourism is reduction of GST so as to compete in global markets. Due to digitalisation and online payments, another major expectation from the Finance Ministry is to seek from the banks a reduction in credit card charges for client payments received to below one per cent. Foreign exchange earnings of all type by travel agents should be treated as exports and GST and income tax should be marginal so that it encourages inflow of business into India.
As per the WTTC Tax Barometer, India has the highest tax in the region with 15-20 per cent. The Finance Ministry needs to make India a competitive destination by reducing taxes and eliminating complexity of GST for this industry. The government also needs to equate export benefits on goods with export benefits on tourism services. Allocate more funds for marketing, promotions, imparting skills and create a level playing field for the trade. Can we also expect an overall outlay of about ` 5000 crore for this industry versus the current ` 1750 crore?
Union Budget 2018 is expected to further harness the potential of the ` 13 trillion worth travel and tourism sector that has phenomenally boosted the economic conditions of the country. The government is likely to give more incentives to propel this drive and make the sector grow even more. We are still scratching the surface of how this sector can grow with more tourism pro policies including strategic continuation of GST plan, infrastructural development through restoration of no-frill airports in Tier-II and III cities, further reduction of corporate tax rates and help domestic as well as foreign tourist arrival to grow exponentially. The Finance Ministry is also in talks of lowering the 28 per cent GST on hotel tariffs. All this combined creates a context of high growth potential for the industry through technology that is the backbone which connects and caters to most customers.
There is a slight disappointment that the government did not announce any major incentive for the sector. Having said that, the infrastructure improvement of 3,500 railways lines across India and setting up of airports in Tier-II cities and dedicated trains for religious tourism will make people travel more. Knocking off the service charge on rail tickets is also a welcome move. However, between promise and delivery there is always a gap, so it remains to be seen how the implementation is done effectively and in time. Tourism zones have also been announced but the clarity on these have not been rolled out yet.
The Finance Ministry needs to reduce direct and indirect taxes and make Indian hotels competitive in terms of price and quality among Asian countries. The ministry needs to encourage rail passes within India with regional and national travel passes like Europe does. It also needs to be tax-free for inbound travellers. The government must declare incentives to develop attractions in all states, and provide incentives on investments for building budget hotels. The Budget should also address refund of tax on shopping by inbound tourists as provided by European countries as VAT refund. Introduce tax free purchase shops in cities for foreign tourists. Incentive should be provided to travel agents for promoting India.
The Budget has always been a non-event for the travel industry, despite tourism being one of the major employment generators in the country. Unfortunately, the travel fraternity does not have a united voice and therefore, our wish list is neither heard nor acted upon by the central government. Even six months after the implementation of GST, the travel bag has multiple categories and a lot of confusion still prevails over its implementation. I wish the budget can at least address and clarify some of the confusion and challenges faced by the tourism sector. The inbound industry will benefit from rationalisation in tax structure in hotel and restaurant business.
The signs of the industry bouncing back is very apparent and we are eager to see how the Budget will further augment growth. The industry has been keenly looking forward to the government’s focus on incentives for the commercial real estate sector such as REITS, real estate regulatory bill and single-window clearances. We are hoping there are provisions and incentives to promote MICE based tourism, as well as Tier II and Tier III markets which are becoming attractive spots for not just cultural and regional tourism, but business tourism as well. We also hope that ad-hoc rulings such as the highway liquor ban of last year are curtailed as these are extremely detrimental to our business.
Tushar Kanti Ghosh Executive President Eastern Himalaya Travel and Tour Operators’ Association
Bharat Bhushan Atree India Travel Award winner and Managing Director, Caper Travel Company
Haresh Koyande India Travel Award winner Founder and MD World Travel Studio
Iqbal Mulla India Travel Award winner and Chairman, Treasure India
Shashank S Mishra India Travel Award winner CEO, Sports Konnect
Dr. Ankur Bhatia Executive Director, Bird Group
EM Najeeb India Travel Award winner Chairman–Southern Region, IATO
Anil Punjabi Chairman, Travel Agents Federation of India (East India)
Nilanjan Basu Joint Secretary Travel Agents Association of Bengal
Subhash Goyal India Travel Award winner and Hony. Secretary, FAITH
Anish Kumar PK President ATTOI
Pronab Sarkar President IATO
Jyoti Mayal Hon. Secretary TAAI
PP Khanna President ADTOI
Mahendra Vakharia India Travel Award winner and President, OTOAI
Mahesh Shirodkar India Travel Award winner and Managing Director, Tamarind Global
Ashwini Kakkar India Travel Award winner Executive Vice Chairman Mercury Travels
Manoj Saraf India Travel Award winner and Managing Director, Gainwell Travel & Leisure
Shwetank Singh VP – Development and Asset Management InterGlobe Hotels
Om Prakash Sehgal India Travel Award winner and Director, InORBIT Tours
Sandeep Dwivedi COO, ITQ India Travel Award winner