India off late had been witnessing a slow economy with major market changes and also being hit hard by the recent demonetization drive which shook the nation’s economy majorly. Everyone had been waiting for the Union Budget, which was due to be released in 2017, with bated breath as it seemed to be the only saving grace of various sectors which had been hit by the Prime Minister’s move.
The Union budget was finally released officially on the 1st of February and has uplifted many while disappointing real estate and political parties. Finance Minister ArunJaitley said he wishes to push for growth of the economy on an urgent basis and also advocated more digitization while putting a cap on political party funding. From plans to spend more on rural areas, on infrastructure and for poverty alleviation, which is an excellent move- there is now no benefit of owning a second home. It surely has hit every individual’s life in a certain manner by either cutting down on taxes on pensionary withdrawals and at the same time has curbed corruption in some ways, But let’s take a look at how it has affected our Tourism sector.
“A VERY DRY BUDGET FOR TOURISM ”
“We had good expectations from this year’s budget in the form of Sops & incentives to open up huge investment opportunities and viable business avenues. We expected that government will take steps at tackling inflation. Also Service tax on tourism sector will be brought down to make India holiday’s packages competitive. As tourism and hospitality industry, we found it a very “DRY AFFAIR” as budget has nothing special to offer to the tourism industry. We had submitted an extensive wish list to boost the country’s tourism revenue and employment through tourism which are major objectives of the government as also the budget for 2017-18. All the more, even some of the benefits which we had have been withdrawn (like earlier we had 70% abatement which is reduced to 40% and earlier it was 30% taxable value and now it is 60% and earlier it was taxed 4.5% on package and now it is double. We expected Service tax exemption against foreign exchange earnings which would have given real boost to tourism. This increase will make our destination more expensive as the tax will impact all components of travel and hospitality. We may lose our business to our neighboring countries which are much cheaper than India. Infact Service Tax should have been waived off for tourism sector as tourism is the largest contributor of Foreign Exchange and employment. It contributes 6% to GDP and nearly 8% to total employment in India” said Mr. Pronab Sarkar, President, Indian Association of Tour Operators (IATO).” However, Union Budget through commitment of high allocation to social, Agro, Rural Sector and infrastructure ensures that India’s consumption led growth story remains intact. In addition government plans to introduce higher allocation to the Flagship programmes such as MGNREGA etc which accounts of Rs 48,000 crores of the total plan allocation – highest any time ever. Also skill development for youths for boosting employment, strengthening of Health, efficiency in Civic governance. Digital economy, Public service delivery, Budget fiscal management, Housing for all with Prime Minister Awas Yojna with higher budget, village electrification are indirectly going to help tourism with progressive development of the country with all such schemes Sanitations has been a priority sector. The steps to bring in GST also we welcome as it brings rationalization of tax structure.
“Only good thing is that the Union Budget made a brief reference of tourism as a source of employment in the country and announced setting up of FIVE TOURISM SPECIAL ZONES and INCREDIBLE INDIA BRAND will be taken to second stage of global Campaign for boosting tourism. The union budget with increased allocation for Railways with different delivery schemes specially with tourism and pilgrimage welcome addition for tourism. Similarly higher allocation for Civil Aviation, Roadways, shipping and other infrastructural development will also serve the cause of tourism.” Said Pronab Sarkar, President, IATO – Indian Association of Tour Operators.
“It is hearting to know that five special tourism zones have been announced in the Union budget. This will certainly help create and provide more jobs. While this is a good move, one also has to equally focus on the fundamentals. If we want numbers, economy and mid market's potential needs to be addressed. We expected some incentives towards accelerated development of mid market accommodation but the same is missing. Unless land lease laws & FSI related amendments are brought particularly in the gateway cities, structured mid market growth cannot be expected. We don't have to do anything new, let's just follow what Singapore & China have done.
Taxation on outbound will also ultimately hurt us.
There is no mention of any changes in the service tax. Hope this is addressed properly while implementing GST.” Said K.B. Kachru, Chairman Emeritus & Principal Advisor, South Asia, carlsonrezidor.
“After demonetization the entire Tourism Industry was hopeful that the taxes will be reduced. It is unfortunate that Service Tax has increased to 9% and this will adversely affect the tourism industry.
On one side the Hon’ble Finance Minister has mentioned about Tourism circuits but on the other side the Indian Tour Operators is being put at a disadvantage viz-a-viz the International Tour Operators.
I hope the government realizes the importance of tourism and try to rectify the situation.” Said Subhash Goyal, Chairman, STIC Travel Group.
“The present budget hasn't much focused on the tourism and hospitality sector. Indirect benefits announced like the infrastructure development on road, rail and airports in Tier-II and Tier-III cities will improve connectivity across the country. Skill development programe for enhancing of education system is sure to have a positive effect in the long term. With such initiatives, people will experience better facilities and better education will also give them an improved civic sense. The Finance Minister announced setting up of 100 foreign language institutes pan India and has allocated funds for women safety. The proposed creation of 5 special tourism zones in partnership with state governments will also likely to boost tourism.” Said P P Khanna, President, ADTOI - Association of Domestic Tour Operators of India.
“The Finance Minister had done a fine balancing act with the Union Budget. “He should be complimented for presenting a budget, which among other things, has laid emphasis on infrastructure development including aviation sector.
The budget proposal to enhance infrastructure outlay to the record level of 3.96 lakh crore is commendable and will give a critical push to the sector. In the civil aviation sector, on airports in tier-II cities, coastal economic zones, introduction of five special tourism zones, emphasis on last mile connectivity etc will augers well. However, the stress should be on implementing these projects on time.
Adoption of public private partnership model, emphasis on cleanliness will go a long way in meeting the aspirations of the people and in unbundling development stimuli. Particularly, the proposal to amend Airports Authority of India (AAI) Act will pave the way for more meaningful public private partnership in the civil aviation sector.
I also welcome the proposal to give tax relief to middle class who have been bearing the brunt on account of steady increase in cost of living. I feel that cut in income tax rates can lead to higher air passenger traffic in the country since people will be left with more disposable income to spend on comforts like air travel. However, he felt that the government should have reduced the corporate tax rates since India has one of the highest rates.” Said D Sudhakara Reddy, Founder & National President, APAI -Air Passengers Association of India.
“Infrastructure is a part of the 10 most important themes in Union Budget 2017 with allocation for infrastructure at a record Rs 3,96,135 crore. Road and rail infrastructure are crucial in terms of boosting tourism as these are widely used mode of transport in India. In this context, stepping up the allocation for national highways to Rs 64,000 crore, announcement to launch dedicated trains for pilgrimage/tourism and service charge withdrawal on booking of rail tickets are welcoming moves which will help to accelerate domestic and inbound travel. Provisions made for clean and safe rail travel and making 500 rail stations disabled-friendly are also encouraging.
We are quite positive about the focus on rural infrastructure development as we see a scope to promote rural tourism even further, especially for inbound tourists. However, we need to know more about what all will be covered in five special tourism zones to be set up in partnership with states. With the new Union Budget setting in, the tourism industry has taken a few blows as well but yes a few budgetary allocations might provide the needed impetus to boost a few facets of our tourism industry.” Said Peter Kerkar, Director, Cox & Kings Ltd.
“In the immediate term, there will be a negative impact due to service tax increase on outbound tour operators & procedural bottlenecks to domestic tour operators. In the long run, if the 5 mega zones get developed it will create large scale new tourism supply stimulating the complete market. The enhanced spending on domestic & international markets should stimulate additional traffic.
Finance Minister ArunJaitley also has endorsed tourism as an important macro-economic activity with big employment generation & economic multiplier impact, in the official release of the Union Budget in the parliament. This surely is a huge thing for the sector’s visibility and possibly will promote investments in the future! This is the beginning of change of a mind-set ofour conventional government which has always thought of treating tourism as an Elite’s pleasure. We must highlight this to all state government officials & to those from other ministries whenever we meet them.” Said Sarab Jit Singh, Vice President, FAITH - Federation of Associations in Indian Tourism & Hospitality.
Mr. Pankaj Patel, President, FICCI said “This budget would tremendously strengthen the economic muscle of the country. It is directionally correct, fiscally prudent and strengthens the governance fabric of the nation. FICCI compliments the Finance Minister on his vision for the economy which alongside economic growth also ensures economic justice. Growth without inclusion can be a liability for the country.”
“I think the biggest takeaway from this budget is the reform introduced in the area of political funding. The demonetisation move of the government was an attack on the stock of black money and the measures announced in the budget on electoral funding will help attack the root cause of corruption of India. FICCI had represented to the government for bringing in such measures that will enhance transparency in line with the tenets of good governance. I give full marks to the government for this bold and pragmatic measure”, added Mr. Patel.
“The announcement to reduce the Income Tax rate for MSMEs with an annual turnover of up to Rs. 50 crore is geared towards expanding the tax base in the economy as well as giving a thrust to employment generation. This will benefit scores of small business units in both the manufacturing and services segments. It is a clear encouragement to businesses to move over to the formal economy”, said Mr. Patel.
“Finance Minister has presented a balanced budget to ensure Indian economy remains on a growth path. He has achieved an admirable balance between providing a growth impetus and creating a tax complaint economy with a focus on job creation.
The budget has clearly articulated the movement towards GST. Its implementation is on track. Its rollout will be a key inclusion to India’s economy.
The announcement of creation of five Special Tourism Zones, and launching of ‘Incredible India-II’ across the world will promote India as a major tourism destination.” Said Vikram Oberoi, President, Hotel Association of India.
“ The new Budget has “very little" to offer to the Travel & Tourism Sector which is still expectantly waiting for the Government’s recognition as an “INDUSTRY”. It is this handicap, together with the lack of unity that exists among the stakeholders and the resulting loss of a collective bargaining capacity, that is proving costly to this all-important Sector.
The announcement to have five special tourism zones set up in partnership with the States along with the launch of the Incredible India -2’s worldwide campaign as the next phase will certainly help improve In-bound tourism.
Emphasis on improving the infrastructure – laying 3500 kms of railway tracks across India, dedicated trains for religious tourism, priority on safety by the creation of a Fund, improvement of sanitation by introduction of bio-toilets – will increase convenience and comforts that will definitely encourage more people to travel more. Withdrawal of service charge on online rail ticket reservation will also encourage domestic tourism. However, everything depends on the projects implementation process and the timeline involved.
Awarding of operations and management of airports in tier II cities on PPP mode will help create a new roadmap. Though service tax been exempted, the Viability Gap Funding under Regional Connectivity Scheme will continue to be a burden on the traveling public. But it will increase regional connectivity and India will become more accessible to global travelers
Considering the tourism segments, it is quite disappointing that the recently announced increased tax slab has not been revised or any incentive package declared. The Sector is still waiting for the ‘Industry’ tag and has yet to see the GST impact. Anyhow, India is still an expensive destination purely based on our taxation policies.” Said Biji Eapen, President, IAAI- The IATA Agents Association of India.