TEN to WIN: FAITH lists 10 budgetary recommendations
The Federation of Associations in Indian Tourism & Hospitality recently released its list of ten budgetary recommendations for revival of the tourism sector.
With the fate of the tourism sector yet to be decided on February 1, 2021, the Federation of Associations in Indian Tourism & Hospitality (FAITH) releases ten recommendations on behalf of the tourism sector.
The ten recommendations by FAITH include:
* One India, One Tourism - National Tourism Council
* GST Policy Corrections for Tourism
* Infrastructure Sector Status
* Export Status
* Domestic Travel Tax Credit
* SEIS Rate
* Underwriting Fund for Travel Agents & Tour Operators
* Global Mice Bidding Fund
* Seamless Tourism Transportation
* Corpus for Sub Branding of three Tourism segments
One India, One Tourism-National Tourism Council
Tourism in India is of two kinds, inter-state and intra-state. Tourism is managed by multiple ministries divided between the central government and the state government. Therefore, The Centre and State governments must efficiently manage the industry. To facilitate that, the formation of a National Tourism Council has been recommended.
This National Tourism Council should be an empowered legislative body to accelerate the centre and state level tourism issues. This will also facilitate the One India One Tourism method for better management across all states.
GST Policy Corrections for Tourism
As the GST rates for hospitality in India ranks as one of the highest globally, FAITH believes that The Centre must review policy issues for Tourism GST as the high GST rates render domestic and inbound tourism in India expensive.
FAITH recommends that the 18 per cent GST category for hotels above room rates of rupees 7500 must be eliminated and combined with the bracket of 12 per cent GST.
Restaurants also have 18 per cent and 5 per cent slabs. However, they come without setoffs.
FAITH believes that removing 18 per cent category and availing GST at 12 per cent with full set offs will lead to better results. Moreover, the linkage to room tariffs above rupees 7500 must also be abolished.
Taxes on fuel, inter-state transportation taxes, power cess, liquor excise and also property taxes, cess on parking charges, contribute to high-cost input indirect costs on tourism, travel & hospitality. According to FAITH, these must be translated as input costs setoffs for GST to facilitate the idea of one country, one tax.
Similarly, the GST on tour operators should be 1.8 per cent with full set offs i.e., 18 per cent GST on a 10 per cent margin. Presently, a 5 per cent GST on tour operator without setoffs translates to 18 per cent on a 38 per cent margin and hence is considered punitive.
Hotels should be allowed to enforce IGST to enable them to give GST credits to Indian corporates engaging in interstate events but do not engage in international events. Following this recommendation will simplify the complete GST chain and improve interstate corporate mice demand for hospitality.
Infrastructure Sector Status
To increase the concentration of high-quality hotel accommodation in India, FAITH recommends that the hotels across the country must be granted infrastructure status. This will allow the hotels to access long-term funds at suitable interest rates to get private capital hospitality, create jobs, and build a quality accommodation supply. Presently, there are less than 0.2 million classified rooms in India, amounting to around 1 per cent share in global tourism.
To achieve a target of 1 million classified quality hotel infrastructure, involving a capital expenditure of rupees 2.5 lakh crores (assuming a conservative weighted average estimate of rupees 25 lakhs per room) Hotels should receive the industry status.
In 2019, Indian inbound tourism recorded over 17.8 million international travellers to India and a global share of 1.2 per cent international travel.
Intending to double India's share of inbound tourism in the post - COVID period to 2.5 per cent in 5 years, FAITH recommends making a deduction in respect of earnings in convertible foreign exchange to all the tourism & hospitality units earning.
Tourism forex earnings should be zero-rated for GST. Additionally, foreign exchange linked exemption from income tax would make funds available for reinvesting in tourism infrastructure.
Domestic Travel tax credit
In 2019, India domestic tourism, witnessed over 2.3 billion domestic tourism visits in India. India's domestic tourism market is estimated to be the second-largest in the world after China.
With a vision to double India's share of domestic tourism to almost 4 billion domestic tourism visits in 5 years post normalcy, FAITH recommends providing income tax exemption on travelling within India.
FAITH has recommended giving Indian citizens tax credits for up to rupees 1.5 lakhs when spending with GST registered domestic tour operators, travel agents, hoteliers and transporters within the country.
To incentivise Indian corporates to undertake domestic mice (meetings, incentives, conferences & events) and prevent Indian mice events from going abroad, FAITH suggests that the Centre should offer a 200 per cent weighted income tax expense benefit to Indian companies undertaking mice events in India.
SEIS credit needs to be made available to the tourism industry against their foreign exchange earnings - the rate to be pegged at 10 per cent for both tour operators and hotels category and is made applicable on gross foreign exchange earnings. It should be made applicable for the policy period of the FTP 2020-25
Underwriting Fund for Travel Agents & Tour Operators
Aviation and travel agents have a symbiotic partnership. But that partnership needs to be kept healthy. As the COVID has shown, travel agents need to be protected in case of aviation collapse. A structured mechanism to secure travel agents' payments is required. Also, measures to ensure that we create security for our travel agents & operators' survival. The recently formed ECLGS under MOF, which is administering the emergency credit guarantee fund, must be used to set up a travel agent underwriting fund.
Global Mice Bidding Fund
The global mice (meetings, incentives, conferences, exhibitions) industry is estimated to be upwards of $ 800 billion, and India's share is less than 1 per cent. This sector has a direct correlation to the GDP. Thus, in line with our GDP share of the world, FAITH aims to double the mice share to 2.5 per cent of the world in 5 years.
FAITH recommends the creation of lobal mice bidding fund with a corpus for rupees 500 crores to target global congress, conventions and conferences, and social events.
Seamless Tourism Transportation
FAITH suggests that the Centre must lay a national transportation policy to facilitate a seamless tourist transportation experience. This step will help standardise all inter-State road taxes and facilitate a single point transaction will lead to the ease of doing business.
Corpus for Sub Branding of three Tourism segments
For creating a structured global awareness of multiple Indian tourism verticals, branding Indian MICE, Indian adventure, Indian Heritage under Incredible India is required. To achieve that, FAITH has requested an allocation of rupees 2500 crores of the global branding budget.
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