Finance Minister Nirmala Sitharaman in her Budget 2021 speech today announced a slew of taxation reforms along with an increased spending on healthcare with Rs 35,000 crore on Covid-19 vaccine development. However, the severely battered tourism industry that was expecting a ‘relief’ has been left majorly disappointed. What has come as a rude shock is reduction of tourism budget from Rs. 2499.83 crore in 2020-2021 to Rs. 2032.04 crore in 2021-2022.
Industry Reaction:
Vishal Suri Managing Director, SOTC Travel
Union Budget 2021 focused on infrastructure, agriculture, healthcare, education and industrial sectors. While the Union Budget 2021 did not directly address several of the demands being made by the travel and tourism industry, it addressed a relatable need that acts as a medium for growth of the infrastructure sector.
More economic corridors are being planned to boost road infrastructure with an allocation of Rs. 1.18 Lakh Crore. The government has set an ambitious target of building infrastructure in the country with special scheme to nudge states to spend more of their budget on infrastructure, providing Rs 1.10 Lakh Crore for railways, privatizing of airports and Indian railways national rail plan for India to prepare a future-ready railway system by 2030.
These contribute towards sustainable growth within the tourism sector. With airports to be privatized in tier 2 and 3 cities, it will improve regional connectivity. Addressing concerns like immediate waiver / rationalization of 5% TCS for outbound tourism, rationalization of taxes will create the necessary boost for the tourism segment.
Jyoti Mayal, President, Travel Agents Association of India (TAAI)
We expected much more than what was announced. However, we believe the Budget 2021 has focused more on spending to enable economic growth through infrastructure roads and financial remedies. Travel, tourism and hospitality was completely neglected.As we await the fineprint, the direct taxes are not clear.
Disinvestment in Air India is expected to be completed this year. Clarity on the same is eagerly awaited by us. For Rail packages over the years this shall be an advantage since the plan is to create a ‘future ready’ Railway system by 2030. Passenger Logistics shall have advantage in the circuits and infrastructure.
Further, TAAI had requested extension of LTC for a period of two years. In order to provide relief to employees, it has been proposed to provide tax exemption to the amount given to an employee in lieu of LTCs subject to incurring of specified expenditure.
Jay Bhatia, Vice President, TAAI
We had proposed single employee benefits / security under one provision which shall care for labour welfare, social security, health, safety family etc. We are happy to note prima facie that the budget has considered this aspect. For the first time globally, social security benefits will extend to gig and platform workers.
Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation. Women will be allowed to work in all categories and also in the night-shifts with adequate protection.
At the same time, compliance burden on employers will be reduced with single registration and licensing, and online returns. This shall assist members of our trade. However, it is disappointing on the part of the Finance Minister to completely ignore travel, tourism and hospitality business in the budget.
Danish Ahmed, CEO, Hospals
“Rs 64,180 crore spending plan for healthcare over the next six years in the budget will take India’s health and wellbeing industry to newer heights and attract millions of international patients seeking quality healthcare in India, boosting the promising medical tourism segment.
With two COVID-19 vaccines available and two more expected, India can become the torchbearer of covid vaccination drive on the global stage. By sharing millions of doses of Covid-19 vaccine in South Asia India has already claimed its global leadership in health and wellbeing and is well applauded by superpowers of the world. With the nationwide Covid Vaccination drive, India can also act as a platform for foreign patients seeking for Covid vaccination in India encouraging Covid vaccine tourism.
Nakul Anand, Chairman, Federation of Associations in Indian Tourism & Hospitality (FAITH)
While infrastructure measure announced as budget announcements, may boost tourism over long term, the opportunity for immediate support has regretfully been missed out.
Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts
While there is nothing specific on the tourism and hospitality sector in the budget, I feel broader focus on the budget on increasing consumption and infrastructure spend by the government will have a positive impact on the hospitality sector.
The government has done the right thing by not introducing any new tax or COVID cess as some had anticipated. We also believe that the amount allocated for COVID vaccination is a positive for our sector as more people get vaccinated it will encourage people to travel.
Sonica Malhotra Kandhari, Joint Managing Director, MBD Group
Overall, the Budget 2021 is a pragmatic and positive budget which is committed to key sectors such as agriculture, healthcare and infrastructure development. Higher 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 & tourism industry in the coming year. Moreover, the privatization of airlines, allocation of Rs. 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.
However, we were looking for some measures related to travel and hospitality sector such as awarding infrastructure status to the hospitality industry and to reduce GST rate on hospitality which have not been addressed in the budget. These reforms would have helped in the revival of this industry as it has been severely battered by the pandemic.
Roop Partap Choudhary, Managing Director, Noor Mahal
Although the budget has not offered any major relief to the struggling travel and tourism industry, providing Rs 1.15 lakh crore for railways and privatizing airports, the government has given some aid to domestic tourism.
A special impetus to local infrastructure development will definitely encourage domestic hospitality, travel and tourism. Development of road networks across the country gives regional and stand-alone players, at locations considered off the main grid, a fair chance to compete with the main-stream hospitality circuits. Other infrastructure developments in Tier II cities would assist the growth potential of regional hospitality players and possibly flip the whole scenario in near future.
The industry largely expected a more liberal and reasonable investment and loan framework from the union budget. A more flexible and tolerant financial environment could have supported small hospitality players to explore more growth avenues in these tough times. To encourage guest occupancy, boost domestic travel and help small/independent properties to be more competitive in the market, GST on room bookings should also be reduced from 18% to 10% as government efforts to support the industry on its path to recovery
Subhash Goyal, Honorary General Secretary, FAITH
This was a great opportunity for the Government to revive the tourism Industry and save at least 30-40 million jobs which are on the verge of extinction out of 75 million people who are directly and indirectly employed in this industry. Not just tourism, there is no mention of the services sector which is a largest employment generator, in this budget.
There are a few good things which may indirectly help the tourism Industry like more tourist coaches and trains in the railways. Privatization on PPP basis of sea ports may help cruise tourism. Privatization of Air India, which we have been hearing for the last so many years, may or may not happen unless there is a deadline for the move.
Madhavan Menon, Chairman & Managing Director, Thomas Cook (India)
Against the challenging backdrop of the COVID era, the Union Budget 2021-22 is an expansionist budget: We welcome the much needed investments in healthcare, focus on capital expenditure, prioritisation of assets, privatisation and no change in taxation – structured around a clear pivot to inspire economic growth.
While the six pillars of the Budget presented a diversified approach to fundamentals, across health, capital, infrastructure, inclusive development, human capital and innovation, focus on the Travel and Tourism sector has been noticeably absent.
For an industry that is a crucial contributor to India’s GDP and a powerful force multiplier, priority tourism related announcements – an imperative to revival and sustenance – were clearly missed. We are looking at a long road to recovery and the Union Budget has not provided the helping hand that was expected of it.
We welcome the focus on transportation infrastructure that forms a crucial base for inbound and domestic Tourism – with the announcement of a Rs.1.18 lakh crore outlay for the Ministry of Road Transport and Highways (proposed 3500 km corridor in Tamil Nadu, 1,100 km in Kerala, 675 km in West Bengal and 1300 km in Assam in the coming 3 years); equally the proposal of a future-ready rail system by 2030 and the next phases of metro projects in key cities with the ‘Metro Lite’ & ‘Metro New’ concepts for tier 1 & 2 regions. From an aviation perspective the announcement of airport privatisation in tier 2 and 3 cities/towns will serve as a boon towards access and affordability; the creation of a hub & spoke model will serve to catalyse the governments initiatives around Project UDAN and Regional Connectivity.”
PP Khanna, President, Association of Domestic Tour Operators of India (ADTOI)
The Union Budget has been largely disappointing. We had great expectation from this year’s budget as the industry is reeling under immense stress caused by the pandemic. We expected some support that may help to curtail the unemployment happening in the industry.
Indirect support like boost to infrastructure development will help the industry to grow in a long run but will not be of help in the current challenging period. We know domestic tourism is supporting the industry at present. The states need fund so that schemes like ‘Dekho Apna Desh’ can help in the growth of domestic tourism. Moreover, steps like income tax exemption on upto Rs. 1.50 lakh credit for people opting for domestic tours through recognized and G.S.T registered tour operators would have helped in the further growth of domestic tourism.
Domestic MICE offer a great opportunity for tourism and hospitality sectors. Incentivizing such MICE movements was the need of the hour too. Overall, we are greatly disappointed by this budget.
Aloke Bajpai, Co-founder & CEO, ixigo
Tier 2 & 3 cities have seen a significant growth in demand for air travel and first-time flyers post relaxation of lockdown norms. Monetization of airports in these areas will help capitalize this growing demand by accelerating infrastructure development in underserved areas and strengthening regional air connectivity. While these infrastructure measures will boost tourism in the long run, it’s sad to see that no extra spends or tax incentives were announced to provide immediate relief to the severely affected travel and tourism sector.
Budget Highlights from Finance Minister’s speech:
Swachch Bharat, Swasth Bharat:
For further swachhta of urban India, we intend to focus on complete faecal sludge management and waste water treatment, source segregation of garbage, reduction in single-use plastic, reduction in air pollution by effectively managing waste from construction-and-demolition activities and bio-remediation of all legacy dump sites. The Urban Swachh Bharat Mission 2.0 will be implemented with a total financial allocation of Rs. 1,41,678crores over a period of 5 years from 2021-2026.
Roads and Highways Infrastructure
More than 13,000 km length of roads, at a cost of `3.3 lakh crores, has already been awarded under the Rs. 5.35 lakh crores BharatmalaPariyojana project of which 3,800 kms have been constructed. By March 2022, we would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors.
To further augment road infrastructure, more economic corridors are also being planned. Some are:
a. 3,500 km of National Highway works in the state of Tamil Nadu at an investment of Rs. 1.03 lakh crores. These include Madurai-Kollam corridor, Chittoor-Thatchur corridor. Construction will start next year.
b. 1,100 km of National Highway works in the State of Kerala at an investment of Rs. 65,000 crores including 600 km section of Mumbai-Kanyakumari corridor in Kerala.
c. 675 km of highway works in the state of West Bengal at a cost of Rs. 25,000 crores including upgradation of existing road-Kolkata – Siliguri.
d. National Highway works of around Rs. 19,000 crores are currently in progress in the State of Assam. Further works of more than Rs. 34,000 crores covering more than 1300 kms of National Highways will be undertaken in the State in the coming three years.
Railway Infrastructure
Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future ready’ Railway system by 2030.
Bringing down the logistic costs for our industry is at the core of our strategy to enable ‘Make in India’. It is expected that Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022. The following additional initiatives are proposed:
- The Sonnagar – Gomoh Section (263.7 km) of Eastern DFC will be taken up in PPP mode in 2021-22. Gomoh-Dankuni section of 274.3 km will also be taken up in short succession.
- We will undertake future dedicated freight corridor projects namely East Coast corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusaval to Kharagpur to Dankuni and North-South corridor from Itarsi to Vijayawada. Detailed Project Reports will be undertaken in the first phase.
- Broad Gauge Route Kilometers (RKM) electrified is expected to reach 46,000 RKM i.e., 72% by end of 2021 from 41,548 RKM on 1st Oct 2020. 100% electrification of Broad-Gauge routes will be completed by December, 2023.
For Passenger convenience and safety the following measures are proposed:
- We will introduce the aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers.
- The safety measures undertaken in the past few years have borne results. To further strengthen this effort, high density network and highly utilized network routes of Indian railways will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error.
- I am providing a record sum of Rs. 1,10,055 crores, for Railways of which Rs. 1,07,100 crores is for capital expenditure.
Ports, Shipping, Waterways
- Major Ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For the purpose, 7 projects worth more than Rs. 2,000 crores will be offered by the Major Ports on Public Private Partnership mode in FY21-22.
- A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs. 1624 crores will be provided over 5 years. This initiative will enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies share in global shipping.
Exemption from Audit
Currently, if your turnover exceeds Rs. 1 crore, you have to get your accounts audited. In the February 2020 Budget, I had increased the limit for tax audit to Rs. 5 crore for those who carry out 95% of their transactions digitally. To further incentivise digital transactions and reduce compliance burden, I propose to increase this limit for tax audit for such persons from Rs. 5 crore to Rs. 10 crore.
Relief for Dividend
In the previous Budget, I had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, I propose to make dividend payment to REIT/ InvIT exempt from TDS. Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, I propose to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, I propose to enable deduction of tax on dividend income at lower treaty rate.
Tax incentives to IFSC
The Government is committed to make the International Financial Services Centre (IFSC) in GIFT City a global financial hub. In addition to the tax incentives already provided, I propose to include, among others, tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors; tax incentive for relocating foreign funds in the IFSC; and to allow tax exemption to the investment division of foreign banks located in IFSC.