Budget 2021 a Disappointment, says the Travel and Tourism Industry

The Indian travel and tourism industry has been one of the worst-hit industries due to the outbreak of the global coronavirus pandemic. After going through a turbulent year, the industry had high hopes from the union budget presented by Finance Minister Nirmala Sitharaman on February 1.

The budget has, however, not lived up to the expectations of the industry.

According to Nakul Anand, Chairman, FAITH, the policy federation of all the national associations representing the tourism, travel and hospitality industry of India, it is the lack of immediate direct support in the budget that has disappointed the industry.

&ldquoThe union budget laid out budget proposals for enhancing rail, road, ports, metro lite infrastructure & PPP in buses, airports and ports including vista coaches in tourist routes. These infrastructure measures may boost tourism over a long term but only once they are implemented," Anand told Outlook Traveller. "The measures to change the small companies&rsquo capitalisation and turnover and support to single person company may boost the micro and small tourism entrepreneurs in boosting their organised state. However the new agri-infra cess will be a further dampener."

He added that the tourism, travel & hospitality industry was looking at support for immediate and short term measures for critical revival. This has not happened in the budget announcements. To ensure that there was an immediate national common tourism vision and revival action plan across the centre and states, FAITH had proposed the creation of a National Tourism Council of Chief Ministers headed by the Prime Minister along with the tourism minister. &ldquoThere was an immediate need for common industry status across the country for the complete tourism industry by putting it in the concurrent list to organise the industry and make them post-COVID ready,&rdquo Anand said.

He added that in order to ensure that the export potential of Indian tourism would have been realised post-COVID, the tourism industry should have been fully recognised at par with merchandise exports, export earnings from tourism should have been made tax free, and incidence of taxes in tourism earnings should have been zero rated. &ldquoSEIS of 10% to all foreign exchange earning members in tourism should have been made applicable for 5 years to ensure a post-COVID recovery. The SEIS for 2020-2021 should have been released immediately,&rdquo Anand added.

He also said that a Global Mice Bidding Fund was required to have been setup with Rs 500 crores to double India&rsquos mice (meetings, incentives, conferences & events) share. &ldquoTo communicate a tourism ready India, Indian missions abroad in each country should have been activated with tourism resources for maximum reach,&rdquo Anand said.

Anand also feels that there was a need of corpus of at least Rs 2,500 crores for global branding budget to enable sub branding of three tourism segments Indian MICE (meetings, incentives, conferences & events), Indian adventure, Indian heritage under the Incredible India main brand to enhance the global outreach of each of these verticals. &ldquoAn income tax exemption on travelling within India and was required to ensure that the tourism industry would have become a mainstay domestic industry,&rdquo he said.

According to Anand, the government should have incentivised Indian corporates to undertake domestic MICE by offering a 200% weighted income tax expense in order to resume post-COVID corporate travel. He also said that a Natural & Cultural Heritage Restoration Fund should have also been set up with a corpus of at least Rs 2,000 crores which would have restarted tourism and encouraged sustainable and responsible development around each vertical of adventure tourism & cultural tourism.

&ldquoThere was a requirement for a truly seamless tourist transportation experience by standardising all tourism transportation taxes making them payable at a single point which will facilitate the ease of doing business,&rdquo Anand said. He added that all hotels and MICE venues across the country needed to be tagged as vital social infrastructure to increase the intensity of high quality hotel accommodation and MICE infrastructure in India.

The pandemic has damaged the travel and tour intermediaries. Anand feels that it was critical to protect the business of Indian travel agents and tour operators and a structured mechanism was required to future secure travel agents&rsquo payments to ensure that security for travel agents and operators&rsquo survival. &ldquoThis was key as travel agents&rsquo payments to principals is unsecured credit and some form of mechanisms whether escrow or guarantee or underwriting based mechanisms were needed to be in place to ensure that travel agents&rsquo and tour operators&rsquo money stays secure,&rdquo he said. The recently introduced TCS which has made Indian travel agents globally uncompetitive should have also been immediately abolished, Anand believes.

Speaking about GST and other taxes, Anand said that it was important to bring overseas global OTAs operating in India into the tax net of GST and other taxes to have a level playing field with Indian travel agents and tour operators. &ldquoThere was a need for  100% tax exemption and permission to write back income / TDS/ GST etc to travel agents and tour operators on their transactions  when airlines windup or closedown. This would have protected them and also Indian consumers,&rdquo he said.

FAITH Associations were also looking forward to GST policy issues in tourism being addressed. Anand said that it was important to bring down the 18% GST category for hotels to the category of 12% GST for post-COVID revival and there was also a need for providing an option of GST at 12% to restaurants with full set offs. &ldquoWith a lot of state taxes on tourism, travel & hospitality at state level, subsuming of GST on fuel, inter-state transportation taxes, power cess, liquor excise and also property taxes, cess on parking charges needed to be made available as input tax costs,&rdquo Anand added.

He further said that the GST on tour operators should have been brought down by 1.8% with full set-offs for revival support. &ldquoHotels should have been enabled to levy IGST to enable them to give GST credits to Indian corporates who do Interstate events and ensure domestic retention of Indian MICE an upmost necessity post-COVID,&rdquo he said.

Not addressing any of these critical measures in the budget announcement has thrown the industry into a state of shock and deep dismay. The tourism, travel & hospitality industry is battling the impact of COVID-19, revival from which will not be seen till the next financial year till vaccination is fully undertaken with no observed side effects in all source and destination markets.

FAITH Associations had been vigorously interacting with all government stakeholders with the hope to immediately pull Indian tourism out of the recessionary conditions in what has been the crisis of the century. &ldquoWhile infrastructure measure announced as budget announcements, may boost tourism over long term, the opportunity for immediate support has regretfully been missed out,&rdquo Anand said.

Chhavi Chadha, Founder of Bespoke Tailormade&nbspExperiences feels that the budget doesn&rsquot address the issues of the travel, tourism and hospitality sector. &ldquoThis sector needs serious attention from the government, first, it should be given an industry status and the tourism sector needs a boost to revive back. Like other industries, 2020 has been a challenging year for travel and tourism, and support from the government in terms of a tax holiday or reduction of GST would give it a much-needed stimulus and perhaps would help a lot of companies survive,&rdquo Chadha said. She added that even though the government is empathising on infrastructure development which in turn would aid tourism, the industry needs a boost to recover and contribute to the economy on an immediate basis.

Tarun Gulati, Director, Himalayan Hotels & DJUBO Hotel Tech Suite said that there had been a lot of expectations from the government on the budget. &ldquoTourism constitutes 10% ($275 billion) to India&rsquos GDP. This is no small amount and we required a plan by the government and the industry to overcome the havoc caused by COVID-19 in this budget. The tourism industry employs 75 million people directly or indirectly. The Tourism and Hospitality sector has made several recommendations to the government to help it emerge from the impact of COVID-19 crisis. But the government failed to give it any importance."

Dr Krishna Kumar, CEO of TravelSpoc, said that inbound tour operators were the biggest hit during the pandemic due to severe revenue decline that resulted in layoffs and unemployment. &ldquoThe industry that employs more than 7 million people, requires a lot of support from the government especially during the COVID-19 situation as it is one of the most affected industries. It was expected that the tourism and hospitality industry to be put in the concurrent list, that there will be rationalisation of GST structure and that we will get liquidity support. We hope that this request will be addressed very soon. It will help the industry to rejuvenate and create huge employment opportunities through multiplier effect. Tour operators are the key and they need to be supported in keeping the industry intact,&rdquo he added.

Rajeev Kale, President & Country Head &ndash Holidays, MICE, Visa, Thomas Cook (India) Ltd thinks that the budget was noticeably silent on specific announcements towards the travel and tourism sector. &ldquoA 19% reduction in the tourism budget from Rs. 2499.83 cr to Rs. 2023.04 cr is a strong concern for a sector that contributes 10% to the country&rsquos GDP and is a critical source of employment for travel, tourism, hospitality and allied industries,&rdquo Kale said.

There are a few stakeholders who feel the budget will help in the revival of the sector. Aditya Chamaria, Managing Director, Damodar Ropeways & Infra Limited said that the budget has been unique in terms of highest ever allocation of NHAI - Rs 1,18,101 crores. &ldquoThe government aims to complete 11,000km of national highway infrastructure this year. This extended support to boost infrastructure is going to be indirectly boosting the tourism sector with improved connectivity, it would also lead to increased job opportunities in the infrastructure sector leading to improvement in employment conditions for the labourers,&rdquo he said.

Speaking about the budget announcements covering the aviation sector, Indiver Rastogi, President & Group Head - Global Business Travel, Thomas Cook (India) Ltd. said that privatisation of smaller airports in tier 2 & 3 cities under the asset monetisation program will serve to extend accessibility to regional circuits and India&rsquos hidden gems and will also increase affordability of air travel. &ldquo. This initiative will aid in the creation of a viable hub & spoke model to catalyse the government&rsquos initiatives around Project UDAN and boost regional connectivity,&rdquo Rastogi said.

Rohit Kapoor, Chief Executive Officer, OYO India & South Asia said that focus on growth-oriented measures, economic reforms and inclusive growth would pave the way for extensive economic recovery. &ldquoIt is heartening to see a budget entirely focussed on revitalising the economy. On the backbone of the proposed reforms, we believe that the government's focus on extending and improving transport (road, railway, metro) infrastructure with nearly 217 projects worth over Rs 1 lakh crore to be completed under the National Infrastructure Pipeline will enable travellers to explore hidden gems and therefore bolster the domestic tourism and hospitality industries,&rdquo Kapoor said.

Sandeep Lodha, CEO, OYO&rsquos Weddingz.in said, he was pleased to see the Government's efforts towards promoting the startup ecosystem in India. The wedding industry was in need of a booster shot to spring back in action. &ldquoWhile there weren&rsquot any direct reforms in the industry, the Union Budget 2021 has laid focus on the fundamentals that can spur the recovery of the sector - financial respite and economic development, strengthening of infrastructure, spotlight on health and relief to taxpayers," Lodha said.

Sonica Malhotra Kandhari, Joint Managing Director, MBD Group thinks that Budget 2021 is a pragmatic and positive budget which is committed to key sectors such as agriculture, healthcare and infrastructure development. &ldquoHigher allocation of Rs 64,180 crore on healthcare which also includes Rs.35,000 crore for COVID-19 vaccines is committed to ensure fast rollout of mass vaccination and restoring normalcy. This is also expected to give much impetus to the travel and tourism industry in the coming year. Moreover, the privatisation of airlines, allocation of 1.10 lakh crore outlay for railways and boost to infrastructure development such as development of new highway projects is a welcome step that would lead the economy to the new growth trajectory,&rdquo Kandhari said.

However, she added that she was also expecting some measures related to the sector such as awarding infrastructure status to the hospitality industry and reducing the GST rate on hospitality which have not been addressed in the budget. &ldquoThese reforms would have helped in the revival of this industry as it has been severely battered by the pandemic,&rdquo she said.