Tourism industry seeks reduction in GST rate, tax benefits to revive sector

According to Nakul Anand, Indian tourism, along with associated sectors, accounts for 9-10 per cent of the country’s GDP and will have to grow to $ 500 billion for India to achieve its stated target of $5 trillion GDP.
Key stakeholders of the country’s travel and tourism industry on Thursday put forward a proposal to the government that included a bunch of measures required to revive the beleaguered sector. Led by policy advocacy body Federation of Associations in Indian Tourism & Hospitality (FAITH), a group of major hospitality industry associations have demanded a reduction in goods and services tax (GST) rate, tax benefits and a dedicated fund for the sector.

According to them, the Covid-19 pandemic has wreaked havoc on the travel, tourism and hospitality industry, resulting in a loss of Rs 15 trillion and putting up to 40 million jobs at risk. With travel restrictions continuing in several places and travellers shying away from tours, a revival is still out of sight.

In order to reduce the burden on business owners and consumers, the bodies have demanded a reduction of GST for tour operators to 1.8 per cent, with full set-offs, from 5 per cent at present. Further, a reduction of the existing 18 per cent GST rate on hotel rooms costing Rs 7,500 per day or above to 12 per cent, has been put forward. “And gradually it should be brought down further, to below 10 per cent with full set-offs, in line with global trends,” they said. Moreover, citing examples of Singapore, Thailand and Japan, the body has demanded income tax exemption on travel within India for expenses up to Rs 1.5 lakh per year that will help reduce the burden on consumers.

According to Nakul Anand, Indian tourism, along with associated sectors, accounts for 9-10 per cent of the country’s GDP and will have to grow to $ 500 billion for India to achieve its stated target of $5 trillion GDP. “That would more than double the economic footprint of tourism from what it is today. Our industry would be looking at more than doubling the jobs that tourism influences from around 5 crores currently to over 10 crores”, he said. However, for its revival, the industry requires government’s support. Anand said, an interest free Covid-19 fund should be set up by the tourism ministry that will help businesses in meeting employee and fixed operating costs.

“The states need to synchronize their border policies in areas falling outside of containment zones. India’s domestic tourism market is estimated to be the second largest in the world, by size, next to China. However, our tourist penetration of domestic tourists per our population is low”, said PP Khanna, president, Domestic Tour Operators Association of India. He insisted that unless revived sooner, the industry may miss out on the opportunity to double its size.

Sharat Chandra, treasurer of Indian Tourist Transportation Association said, since lack of cash inflow is presently the most pressing issue, “It is critical that unutilised GST credit that is with the government should be refunded to the operators. This will pump in some liquidity into the system. Further, it is important to have exemption from payment of insurance premium for tourist transport vehicles for the financial year till business environment normalises”, he demanded.

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