Hospitality Insider Incredible India

Nothing substantial for India’s tourism and hospitality sector in Union Budget

India’s Finance Minister, Nirmala Sitharaman presented the Union Budget 2019-2020 of the Modi 2.0 government on July 5, 2019. The budget has failed the expectations of the tourism and hospitality segments miserably. 

The successive governments that ruled the country over the years have completely ignored the contribution of the industry to the economy and in fact always equated the sector to ‘luxury’. Any hopes that surfaced after the ‘5 Ts’ mention have long back dusted (for the uninitated BJP while releasing its manifesto in 2014 had said it will focus on ‘reviving’ Brand India with the help of 5 Ts: Tradition, Talent, Tourism, Trade and Technology). In the hindsight the mention of tourism in 5 Ts seems to be a typo error. The longstanding demands of the sector including tax relaxation and exporter status found no takers this year also.

However, the industry in its reaction on the Union Budget though critical has mostly been cautious and even hopeful.  Following are few of the reaction of the industry insiders on the Union Budget 2019-2020.

Pronab Sarkar, President, Indian Association of Tour Operators (IATO)

There is no focus on tourism in the Union Budget 2019-20 except that the government has re-emphasized on the 17 iconic sites being developed into model world class tourist destinations, which has been taken forward from the last year budget. 

We have been requesting the government  for rationalizing of Goods & Services Tax (GST) on tourism and hospitality,  exemption of GST on foreign exchange earnings by the tour operators and treating tourism industry as deemed exporters and extending all benefits to the tourism industry as are being given to physical exports of goods. We had also demanded reduction in tourist visa fee so that we can compete with our neighbouring countries.  However, our demands remains pending and we hope our requests will be considered by the GST Council.

However, we welcome the mentioning of simplifying of GST process and absorbing of charges on digital transactions. We also welcome the plans of the government to restructure the national highways programme in order to create a network of highways for better connectivity, upgradation of 125,000 km of roads in next five years at a cost of INR 802.5 billion rupee, more focus on Swachh Bharat mission and expansion of railway suburban networks which we expect will boost inbound tourism.

Subhash Goyal, Chairman, ASSOCHAM – Tourism & HospitalityCommittee

We welcome the Finance Minister’s statement that they will reduce Corporate Tax rates and include all companies with an annual turnover between INR 250 crore to 400 crore in the 25 per cent tax bracket. This will cover 99 per cent of tour operators and travel agents of lndia. However, we are disappointed that nothing substantial about tourism has been mentioned in the budget. Although the honourable Prime Minister’s vision is to create millions of jobs and double the inbound tourism from 10 million to 20 million. If his vision is to be realized, then we need to increase air seat capacity in and out of India by atleast 15 million.

The industry demand of reducing tax on aviation turbine fuel to 1 per cent should be implemented as the direct operating cost of the ATF for an airline is from 25 to 30 per cent that is why most of the Indian carriers are bleeding.

We as tourism industry were expecting exemption on GST and other taxes based on foreign exchange earnings as tourism and services export contribute inmensely to the Indian economy and are the largest job creators.

No new incentives have been provided to the exporters of Goods and Services. If we have to make India a 5 trillion economy than all export industry including services export and tourism strould be given incentives and benefits. In many countries the total tax on tourism including GST is not more than 5 per cent. By over taxing tourism, we are killing the goose that lays golden eggs.

While we appreciate the incentive being given for infrastructure, it would be nice if hotels and hospitals are treated as infrastrucutre and given such benefits. This would make India Tourism more competitive and also encourage medical tourism into the country.

We welcome the development of waterways, aircraft financing and leasing. The Sagarmala project, the improvement of railways will also help tourism. The scope of leave travel concession (LTC) should include not only govemment employees but also private employees as it would give a boost to the domestic tourism and those private companies who give LTC to their empioyees should be given tax beneits.

We welcome the budget allocation for development of 17 iconic tourist sites with digital experience in different parts of the country. However, it should not be limited to the 17 iconic sites but to all the UNESCO World Heritage Sites should be made iconic with digital experience.

Most of the tour operators and travel agents are under the micro, small & medium enterprises (MSME) category. The 2 per cent interest subvention on interest rates on fresh loans upto INR 1 crore which will be sanctioned immediately has been welcomed by the tourism industry.

On the other hand the demand of the inbound tour operators to decrease the E-Visa fee to 25 dollars has also not been considered by the government.

Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI) & President, Hotel & Restaurant Association of Western India (HRAWI)

The industry expectations were high but the Union Budget has neglected us completely and we are disappointed yet again. While the government wants to give impetus to hospitality and tourism and our honourable Prime Minister has envisioned big things for the sector, there is no mention except of the 17 tourist-friendly spots in the Union Budget.

We were expecting reforms in rate slabs of GST, Input Tax Credit and a definitive step to boost the domestic and inbound traffic. Hospitality sector plays a vital role in the growth of the economy. Therefore, this sector cannot be ignored. It is one of the biggest contributors to GDP, taxes, foreign exchange and most importantly in generating employment. 

As per industry reports, total contribution by travel and tourism sector to India’s GDP is expected to increase from Rs.15.24 trillion (US$ 234.03 billion) in 2017 to Rs.32.05 trillion (US$ 492.21 billion) in 2028. The success of Incredible India lies in managing its hospitality and tourism right and requires policy support. For the programme to be successful, it is paramount that the notion about the hospitality industry being ‘elitist’ be dropped. Overall, this is a good budget for the middle and lower class which will help strengthen their income base but there is nothing for the industry. We will look forward to working in tandem with the Finance and Tourism Ministries in boosting the influx of both domestic and foreign tourists.

Jyoti Mayal, Secretary General of Travel Agents Association of India (TAAI)

Tourism is no longer an important focus of our government. Mere mentioning about tourism won’t make the industry grow. India is poised to be a 5 trillion USD economy in the next 5 years and we hardly see any strong initiatives for the tourism sector. We were looking forward for the government to announce many more initiatives for the growth like ease of doing business, zero taxes on domestic tourism and plan to develop smart cities. The tax rebates for the middle income group is the only thing which may impact the growth of tourism as disposable income will increase. 

Vineet Verma, Executive Director & CEO, Brigade Hospitality Services

The budget overall was quite progressive, policy-driven and should deliver positive results in the long term. However, we are disappointed to see the tourism and hospitality sectors having been mostly ignored. We are still hopeful that the GST Council will review and bring down GST rate for hotels from the present 28 per cent to at least 18 per cent.

Madhavan Menon, Chairman & Managing Director, Thomas Cook (India)

The travel and tourism industry is a crucial contributor to India’s GDP with a powerful multiplier impact, including employment generation, and hence we appreciate that the Union Budget 2019-20 reflects a clear growth priority for NDA 2.0, with potential to catalyse India’s domestic, inbound and MICE segments. Steering away from a populist approach, the government has taken a long-term view with focus on revitalising the Indian aviation and travel and tourism sector. With this budget, the government has addressed the key fundamental challenges like liquidity, FDI, employment and infrastructure development. It has also focused on enhancing the role of AI, robotics, technology which will lead the nation on the path to be future ready and benefit employees and workforce, at large.

The lowering of corporate tax (25%) up to companies with turnover of 400 Crore is a welcome move especially to MSMEs and social enterprises. The effort is clearly on environmentally responsible growth, thereby living up to our promise of sustainable development.

Transportation infrastructure forms a critical base for the travel and tourism sector. And hence the budget announcements that focus on road and waterways via Bharatmal, Jalmala, Sagarmala, equally on massive railway modernisation and safety initiatives, backed by an overall budgetary outlay of INR 100 lakh Crore is truly a welcome move. In addition, the government’s continued focus on UDAN to boost regional air connectivity and access, while simultaneously ensuring affordability to common man, is indeed laudable.

From an aviation perspective, much anticipated support to the sector has seen delivery via the Finance Minister’s announcements on FDI, aircraft financing and leasing, policy interventions for development of maintenance, repair and overhaul in India (MRO) to resuscitate the industry, and will certainly bring in a multiplier effect on airfares and job creation.

A noteworthy initiative is the setting up of 17 iconic tourism sites as world-class tourist centres, coupled with a Digital Repository to serve as a bank of documentation on India’s tribal history and heritage containing folk songs/dances, videos on their evolution, traditional arts, anthropological documentaries of tribes to preserve the rich tribal heritage.

Anil Parashar, President & CEO, InterGlobe Technology Quotient 

Union Budget 2019 definitely marks the beginning of the new India. It will give a much needed boost to the Indian travel and tourism sector. With the ongoing UDAN scheme for common man, we can expect better air connectivity, improved infrastructure and bridging of the gap between rural and urban sectors. 

Another visionary project ‘Sagarmala’ will enhance waterways and port connectivity that will uplift cruise tourism in India. As the government understands the need to invest and improve infrastructure, I am sure this budget will add pace to the economic development of the nation.

Rakshit Desai, Managing Director, FCM Travel Solutions, Indian Subsidiary of Flight Centre Travel Group, Australia

The government’s continuous commitment towards building a better physical and social infrastructure is a commendable gesture. Several initiatives which the government has undertaken like the Pradhan Mantri Gram Sadak Yojana, Bhartamala and Sagarmala projects, Jal Marg Vikas, industrial corridors and dedicated freight corridors are laudable and reflect how these infrastructural reforms will impact the tourism industry positively in the coming years. The UDAN Scheme which is designed to enable air connectivity to smaller cities is going to make air travel more accessible.

The INR 70,000 crore capital credit infusion for PSU banks should facilitate the growth of consumer credit and accelerate consumption of travel experiences. Also, the decision to develop 17 iconic tourism sites into world-class tourist destinations will further help in boosting tourism in those regions and at the same time serve as a model for other tourism sites in the country. The launch of railway station modernization programme this year will also attract more travellers and enhance railway travel experience. Crude oil prices have relaxed; however, the cost of Aviation Turbine Fuel (ATF) remains a concern as ATF constitutes around 35 per cent of the total operating costs of an airline in India, while globally it stands at about 25 per cent.

Vijay Dewan, MD, Apeejay Surrendra Park Hotels & Chairman, CII, West Bengal State Council

This Union Budget is not only pro-working class, but also pro-development and growth. Increased FDI in key sectors like aviation will help boost the sector. Rationalisation of multiple labour laws and making India hub for the manufacturing of electric vehicles is a positive step. Development of 17 iconic sites to be transformed in world class destinations will help boost foreign tourist arrivals. 

However, industry demand of free visas for five years and competitive GST rate has not been met. The Indian travel and tourism sector which has emerged as a key growth driver and is one of the biggest employment generators didn’t see any concrete provisions in this Union Budget.

Vikram Kamat, MD, VITS, Kamat Group

We were eagerly looking forward to a boost for India’s tourism, which could bolster other aspects like job creation, wealth creation, and support other sectors like hospitality, retail, transport. However, no significant focus on the indistry has been mentioned in the budget, which is unfortunate. 

Our industry associations have already been pursuing that input credit be allowed for restaurants which is presently only applicable to 5-stars. Like any retailer in a mall or high street, a restaurant also should get the benefits of input credit on rent and all input costs. Incidentally, a caterer is eligible for input credit which maybe from the same outlet. Nonetheless, we are hopeful that all these concerns shall be addressed in the coming days.

Vishal Suri, Managing Director, SOTC Travel

Travel and Tourism industry is a vital contributor to the country’s growth.  The proposal statements made by the Finance Minister in the Union Budget will provide impetus to the tourism sector. As India is poised to become the 3rd largest domestic aviation market, the budget has focused on reviving the concerned sector by opening FDI doors. Liberalisation of FDI will attract investments from foreign players, which will revive the current cash-strapped aviation sector, thereby stabilising the aviation industry, which will in turn lead to incremental benefits for the tourism industry.

Aditi Balbir, Founder, and CEO, V Resorts

We are expecting more schemes and policies for travel and tourism sector. The attention of our honorable Finance Minister, Niramala Sitharaman on policies pertaining to better connectivity for different tourist destinations, enhanced facilities, and experiences for the tourists will certainly help our tourism industry. The focus should also be given to the gap in the skilled workforce which can be fulfilled by starting skill development programs. 

The development of 17 iconic tourist sites as world-class tourist centers by the government comes as great news for the hospitality and tourism sector. This will not only attract more tourists but also generate better job opportunities. The budget also paid emphasis on the promotion of the rich tribal heritage of India and its culture. Steps were taken to ensure that it goes beyond our own borders will encourage tribal arts, crafts, and fashion on a global platform. This might put us on the world map and generate revenue for the tribal sections of our society.

Varun Chadha, CEO, Tirun Marketing

We are glad that the government has focused on the travel and tourism sector in this year’s budget and proposed positive steps to enhance its prospects. The government has pledged to develop 17 iconic world-class tourist sites while simultaneously popularizing the existing tourist spots. 

India is one of the few countries that offer a dynamic tourism landscape including natural, cultural, spiritual and experiential tourism. On the domestic tourism front, the National Common Mobility Card will add to the convenience of travellers significantly for making cross-segment payments. Hopefully, the government’s initiative will help establish India as a global tourism hub and help the sector contribute much more than the 9 percent it is contributing to the GDP currently.

Nalini Gupta, Head of Costa Cruise India

Indian coastline has immense potential for cruise tourism. The proposed inland waterways development by the government is a positive step towards boosting coastal tourism in India.  The Varanasi – Haldia route will be an opportunity for river cruises to provide inland waterways tourism to domestic and foreign tourists. 

Additionally, the government’s plan to enhance 17 iconic tourism sites into world-class tourist destinations will not only increase inbound foreign tourists and domestic tourism but will also boost related infra structural development. The proposal of an ATM-like, One Nation One Card for pan India travel will ease inbound travel and will be convenient for tourists to explore India without any hassles. We look forward to leveraging these opportunities for the upcoming season.

Palash Roy Chowdhury, Chairman, AMCHAM Civil Aviation Committee and Managing Director – India, Pratt & Whitney 

 We welcome the government’s intent to adopt suitable policy interventions to stimulate the maintenance, repair and overhaul (MRO) industry in India. We look forward to much needed government support that will enable the local MROs to compete with foreign ones which enjoy a more favourable import tax regime. This will not only boost the local MRO industry but also contribute to the government’s tax revenues.

Bharat Malkani, President, The MRO Association of India

Thanks to the Indian Government, especially the Ministry of Civil Aviation, The Ministry of Finance and the Office of the Prime Minister for recognising the potential and opportunity present by MRO industry. 

We are confident of turning India from an importer of MRO to a net exporter and create over 100,000 direct jobs and revenues exceeding INR 35,000 crores in the next five years. India is the world’s fastest-growing aviation industry and creating a MRO ecosystem within the country will be both economically and strategically beneficial for this great country of ours.

Dinesh Kumar Kotha, Co founder & CEO of Confirmtkt – train booking & discovery app

The Honourable Finance Minister has proposed that the Indian railways will use a PPP (Public-Private Partnership) model for faster development and delivery of passenger freight services. At present, there is a massive demand for train tickets. Hopefully, the PPP will enable the railways to add more trains and coaches so there is enough supply of seats to meet this demand. This, in turn, will contribute to industry growth. 

Currently, only 4 per cent of India is directly connected through railways which comprises of 4 lakh routes. If new trains are added or railway lines are extended, the railway connectivity will increase manifold. For startups, the government finally addressed the Angel Tax issue – startups and investors who file requisite declarations won’t be subjected to any kind of scrutiny in respect of valuation of share premium. This will prevent many startups from closing down due to fund shortage. However, there were no announcements made on providing greater access to finances (working capital loans, credit lines, funding etc) to startups. Nevertheless, the budget 2019 seemed to be well thought out.

Sunil Bhaskaran, MD & CEO, AirAsia India

The government’s proposal to introduce aircraft financing and leasing will bring down the costs for carriers hopefully. Also, the announcement of identifying and developing 17 iconic tourism sites will boost domestic air travel demand.

Sunil Gupta, MD & CEO, Avis India

We are delighted with certain provisions made in the latest budget, as they underline the government’s commitment to promoting electric vehicle (EV) adoption in India. The move to allow an additional tax deduction of INR 1.5 lakh on loans taken for EV purchase, in particular, will incentivize more Indian consumers to buy electric vehicles.

 Sustaining this momentum, however, will require a dedicated push to create a stronger EV support infrastructure on a pan-India level. We hope that the government will prioritize this aspect, as it will be integral to bolstering the growth of the country’s EV industry and will also help in drastically reducing carbon emission and air pollution levels.

Aditya Ghosh, CEO – India & South Asia, OYO Hotels & Homes

The budget breaks away from tradition and nudges the public and policymakers to think outside the brown briefcase. It sets a vision for the next decade for India with intent to bridge the socio-economic and urban-rural divide. 

The boost to infrastructure, labour reforms, access to capital and talent for start-ups and MSMEs alike will drive productivity and consumption, which is also good news for the hospitality, travel and tourism industry.  The real test of this vision, however, will lie in its realization, which is essential to deliver on the government’s mandate of providing ease of living and ease of doing business. This will be possible only through concerted efforts from all stakeholders.

Balaji Ramakrishnan Founder and CEO of Insteract Technologies

It was great to hear the government’s steps in improving air connectivity and bringing more airports under the UDAN program.  While improving regional connectivity is important it is also important to increase the capacity of the airports as more people travel. It was great to hear that the government is planning to expand airport capacity more than five times to handle a billion trips a year under a new initiative – NABH Nirman.  What is not clear is the time-lines to achieve these goals.  Since its launch in 2016, UDAN program has been slow to implement. In two years only 16 airports have been connected so far.

Aloke Bajpai, CEO & Co-Founder, ixigo

Creation of additional tourism sites is a positive move that will have a long term impact in boosting tourist inflow and enhancing the overall visitor experience. Setting up a digital repository of architecture, traditional art and folk dances, is an excellent way to showcase our country’s rich tribal cultural heritage and promote authentic and ethno-tourism.

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