Industry’s Expectations from Union Budget 2022-23

The Union Budget 2022-23 is likely to be tabled on February 1, 2022 by Union Finance Minister Nirmala Sitharaman. This is the 4th Budget of the PM Narendra Modi-led NDA government in its second tenure. 

Travel, Tourism and Hospitality industry has a very high expectation from the upcoming Union Budget 2022 -23. Industry expects more relief and incentives as pandemic has hit the travel and tourism industry the most. The industry has been facing a very challenging time since the onset of the pandemic. T3 collates here the expectations of the industry.

Federation of Associations in Indian Tourism & Hospitality (FAITH)

Aashish Gupta, CEO, FAITH : “The Union Budget 2022-23 is an opportunity to undertake corrective actions for travel, tourism, and hospitality. FAITH, among other things, is taking up with the Ministry of Tourism and Ministry of Finance the aspects of infrastructure status for hotels, abolishment of TCS on travel, export status for forex earnings for tourism members, extension of ECLGS, provision for a revised SEIS of 10% and wage support for tourism employees in addition to free tourist visa extension for full year.”  

Travel Agents Association of India (TAAI)

Jyoti Mayal, President, TAAI: “I very strongly believe there are several aspects which can be expected in the upcoming budget session to support the entire sector holistically ‘Travel Tourism & Hospitality’ which will help in making this sector survive, revive & economically support India to become the largest hub for the world. For this, it is extremely important for both the central and state governments to work in tandem to facilitate this sector & support it to be included in the concurrent list to get Industry Status to make it more structured.

The government should strive to increase the disposable income of the middle classes so that discretionary spending will rise. Concrete steps should be taken to improve the cash flows and reduce the working capital burden on start-ups, existing MSMEs & SMEs. Access to easy credit, reducing income tax rate & GST tax rate, abolishment of TCS & wage support with ease of business. Strengthening MSMEs, creating a fund of funds scheme for technology adoption for use in industry 4.0, reviving the Credit Linked Capital Subsidy Scheme (CLCSS) for technology up-gradation.

To revive this struggling sector, we need ‘One India One Tourism’ approach inclusive of ‘One Tax Structure.’ Important points to be considered are E visa fees waiver for all tourist visas for 2022-2023, to support inbound revival Export status for tourism export earnings to support the inbound revival. Doubled, expenditure allocation for tourism ministry to enable intensive global reach out to support the inbound revival. Domestic income tax travel credit for Indian citizens and Indian companies to support domestic retail and domestic mice pickup. Global bidding fund to enable bidding support to Indian mice companies to bring global mice events to India. Emergency Credit Line Guarantee Scheme (ECLGS) extension for tourism and hospitality. ATF ought to be brought under the GST to make air travel more viable for the entire aviation stakeholders.

Lastly & most vital is a structured mechanism to future secure travel agents’ payments to ensure that we create security for our travel agents & operators’ survival. Travel agents’ payments to principals are unsecured credit and we need to ensure that some form of mechanisms whether escrow or guarantee or underwriting based mechanisms are in place to ensure that travel agents money stays secure.”

Hotel Association of India (HAI)

“The hospitality industry was slowly getting into a recovery mode on the strength of domestic tourism – leisure and events, only to be plunged back into uncertainty on account of the omicron threat. It is critical to protect the industry during such prolonged periods of flip-flop in business prospects. The support required from the government cannot be emphasized enough. Policy interventions are imperative for the sector’s survival and its early and quick re-bound to normalcy. According hotels the status of ‘Infrastructure’ will resolve a large number of the issues being faced by hotels and hospitality companies. It will also help survive operationally and encourage investments in the sector. Access to softer funding, longer periods to repay loans, resultant shortening of the gestation period will make hotel investments more attractive and sustainable. More hotels would mean more jobs, more development. The sector’s cascading effect on the economy has already been well established and documented. Infrastructure Status will also enable hotels to avail benefits of lower taxation, utility tariffs and simplified approval process for projects. Additionally, the road to recovery can also be aided through measures like extended moratorium, rationalization of taxes and facilitating ease of doing business.

HAI has submitted detailed suggestions to the Finance Ministry on some easily doable policy reforms which will greatly help in revival of the industry and will also enable it to flourish in the long run.

Hospitality industry contributes 9% to India’s GDP employing nearly 4.5 crore people and providing livelihoods to around 16 crore people. Due to the pandemic, the potential shock to livelihood of millions working in the hospitality industry is enormous. The Indian hospitality sector has a critical role to play in the post-pandemic economic revival and has been announced as the fourth pillar of the Indian economy.”

PHD Chamber

a. GST Rate for Hotel and Restaurant Services - It is suggested that to ensure a level playing field between stand-alone restaurants and those situated inside “starred” hotels the rate of GST on the latter category be reduced from 18% to 12% with availability of input tax credit.

b. To boost up Hotel Industry and make it more competitive, it is suggested to lift the restriction of Section 17(5)(c) and 17(5)(d) of the CGST/SGST Act for this industry and to allow 130 | PHD Chamber of Commerce and Industry input tax credit on goods and/or services used in construction of Hotel Building and fittings (in immovable nature).

c.  PHD Chamber suggested that tourism services provided to Foreign Tourists in India on receipt of foreign exchange should be treated as “Deemed Export” and exemption of GST should be made available.

d.  To revive the consumer demand, it is suggested that all Restaurant and Outdoor catering services, irrespective of whether they are stand-alone or part of a hotel, should be Zero-rated or in the least be subjected to GST at the rate of 5% with full availability of input credit

e.  It is suggested that place of supply rules be modified so that taxes are charged basis the place of registration of the customer i.e., IGST is charged for customers outside the state to enable credit availment. This will enhance inter-state Indian meetings industry movement with companies getting interstate GST credit while using hotels for meetings tourism in other states in which they are not registered. This will also complete the end-to-end tourism value chain from hotels to tour operators and avoid double GST levies.

Noesis

“With inbound tourist arrivals unlikely amidst the pandemic, the industry wants the government to incentivise domestic travels with income tax benefits for a limited period so as to help the hospitality and tourism sector get up again by tapping the pent-up demand for holidays, within the country. Thousands of hotels and restaurants are struggling to stay afloat due to covid impact. Hospitality and tourism industry is struggling to survive in this difficult time. Nandivardhan Jain, CEO, Noesis presents few suggestions for the upcoming budget 2022-23. 

• A financial assistance package for the remuneration of the tourism and hospitality industry is needed. To pay salaries of various staff as well as their employee provident fund and other medical expenses bared by their employers. This would help retain staff as well as help the business function utilizing minimum resources to run their business.

• Infrastructure Status for the industry, so that the hospitality sector is able to access capital at lower cost and for a longer tenure up to 20 to 25 years. As hotels are high capex business with a longer gestation period.

• For Infrastructure, benefits to be provided for lower taxation, utility tariffs.

Recommended a higher depreciation rate for hotel buildings from 10% to 35%. Since hotel building comprises 70% of the project cost and gets depreciation of 10% only.

Capital expenditure in Plant and Machinery is at 15% to add an additional 20%.

• A single clearance system and digitization and ease of setting up a hotel would help many start a hotel in a seamless manner.

•  A tax relief is also a need of the hour as taxes are high, as it has taken a toll on the industry in the last two years. A reduction in taxes for hospitality would help them stabilize their business for the due course of time.

A change in GST tax structure to flat 5% irrespective of room tariff.”

Madhavan Menon, Managing Director, Thomas Cook India Group

“The Travel & Tourism sector has been a key contributor to the GDP and the Union Budget offers the government a significant opportunity to create a stimulus towards revival.

The last 2 years have highlighted the power of the domestic market and towards unlocking the full potential of domestic tourism, we look forward to Budgetary focus on infrastructure development, technology and health-safety across airports/aviation, road, rail and waterways. India’s waterways offer a large, underleveraged potential that includes sea and river cruising opportunities and cascading employment benefits to the catchment areas. 

Empowering our global embassies, export (zero-rated) status to the inbound tour business and deeper marketing investment is much needed to kick start inbound demand and ensure competitive viability when compared to our neighbours in the region.

We look forward to the Government’s announcement of granting Industry status, rationalisation of taxes (including a complete GST tax holiday, exemption of TCS levy on overseas holiday packages and reduction in indirect taxes), removal of SEIS benefit capping of Rs. 5 cr and introduction of soft loans with favourable terms as a stimulant to enable the sector to get back on its feet. This will equally harness its force multiplier impact towards GDP contribution, employment generation/ skill development - much needed as the Country heads towards recovery, revival and growth.”

Aloke Bajpai, Group CEO & Co-founder, ixigo

“As the pandemic becomes endemic, we are seeing the true bounce-back potential of domestic tourism which saw a sharp rise in tourist flow in 2021 due to pent-up demand, vaccine roll-out, and revenge tourism. While demand and search queries for travel have been slowly climbing in the last two quarters and the industry is regaining momentum, certain provisions by the government can help bolster the industry back to pre-COVID-19 levels sooner. We have noticed the rise of domestic air travel from tier 2 and 3 towns and budgetary focus on the development of infrastructure, technology, and safety measures of existing and new airports in Tier 2 & 3 cities will help boost tourism by improving connectivity with those cities where trains or buses may be the only connectivity today. We are looking forward to the government strategising a sustainable long-term plan to help revive international travel which is currently disrupted by ongoing waves. The introduction of innovative initiatives like the ‘sandbox schemes’ currently being followed by countries like Thailand and Indonesia will help India build a more resilient tourism economy going forward. We also expect the upcoming budget to allot incentives for domestic tourism and promote it within the country. IT deductions on domestic travel and tourism spends will help incentivize tourism and boost domestic travel further. Tax breaks and waivers for the airline sector will also help aid faster recovery of the industry. Bringing ATF under the ambit of GST (which currently comprises 40-45 percent of the total operating cost of an airline) will bring much-needed relief to the aviation sector. "

Rajnish Kumar, Group CPTO & Co-founder, ixigo

“Train travel in India has seen a faster recovery than other travel modes with a swift recovery of reserved train ticketing. Since the onset of COVID-19, more travelers are opting to book reserved coaches on trains for enhanced safety and train travel in non-Tier I cities. This has led to a resilient demand segment for railways as even during peak COVID waves, over 50% of railway capacity was still being serviced. The upcoming budget has the potential to re-invent the railway sector by adopting smarter strategies that prioritizes health and safety of train passengers. We believe that digital distribution of unreserved train tickets through IRCTC and OTAs should be prioritized to reduce queues at the railway station. Reinforcing public transport systems and SRTC bus providers with advanced technologies like QR code-based ticketing and IoT can help build a safe commuter environment by uncrowding public transport spaces. Initiatives like contactless systems, automated sanitization, voice or motion activated devices can minimize contact with high-touch surfaces and prevent cross infections at crowded railway stations and bus stations.”

Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts

“It’s well known that the hospitality sector has been one of the most impacted industries because of COVID. Before the Omicorn hit us, we were steadily getting back on track. However, the sector has again been badly hit and there are several hospitality companies, especially small and medium enterprises, who are in distress. It would be good if the budget provides the industry with structured assistance so that the industry can get back to functioning at the optimum level and continue to contribute to India’s economic growth and rise.”

Mehul Sharma, Founder & CEO, Signum Hotels & Resorts

“For the revival of India’s hospitality industry, domestic tourism must flourish. Measures to promote and facilitate domestic tourism must be put in place. Government must consider steps to promote local destinations from within the country and encourage travelers to explore their own country. LTA should be increased to incentivize people to travel. We must target to achieve 15-18mn domestic tourist numbers.

The long pending demand for Hospitality to be granted an infrastructure status remains unheard. Hospitality must be recognized as an industry that contributes strongly to the country’s economy.

We would also like a review of GST. A lower GST and taxation on hospitality, food and beverage services is much needed. Also, a uniform tax structure across the board is the need of the hour. Liquidity to be made available for upcoming hospitality projects. Increased international investment in hospitality should be allowed to achieve this.

Government must create a pool of funds to improve infrastructure and tourism focused development. Tokenization as a process and use of blockchain technology to raise funds should be implemented. Low credit rates on loans extended to hospitality projects must be considered to sustain development in this sector. “

Manish Rathi, Founder & CEO, IntrCity

"The intercity mobility segment has seen a consistent month-on-month growth after the 2nd wave. The third wave's influence has been felt, and some trip plans have been postponed, particularly in states with higher levels of dispersion. The silver lining for next year is that, because of the government of India's rapid vaccination effort, travellers are confident in travelling to locations, and the industry is looking forward to normalcy as COVID daily cases reduce again.

We are hopeful that in the forthcoming budget, stronger infrastructure initiatives will be incorporated into the National Infrastructure Pipeline. The mobility needs of smart cities will lead to the next wave of inter-city mobility growth and enable smooth connectivity with the nearest metro city, besides connectivity between those cities. Better multiple boarding infrastructure in the city connected to SmartBus and digital booking will drive this growth and power the economic growth of these cities.

2021 was a pivotal event in the transition to electric mobility within the intracity segment. The government should implement a few more favorable regulations to boost green mobility. Additional policy impetus should be provided for all forms of green fuel and their enablement for inter-city mobility: batteries with longer distance capability to power EVs, charging infrastructure, and highway CNG stations.

Besides, they should also monitor the implementation of the All-India Tourist Permit for Commercial Vehicles, ensuring that it is accepted by all state RTOs."

Aditya Chamaria, MD, Damodar Ropeways & Infra

“We expect the Government to introduce measures in this Union budget 2022-23 which will help to improve the potential of ropeways, boost tourism and enhance urban transport connectivity.

GST on ropeways currently is at 18%, which is higher than that on air travel at 5% (economy) 12% (Business class), Railways (5%), Highway Tolls (0%). In fact, ropeways should be treated at least at par with Railways where the GST is 5% with input tax credit, because they cater to all sections of society. Even this tax reduction will go a long way in boosting the industry and making it more viable to operate Ropeways without having to raise ticket prices to offset the increases in all other input costs.

The ropeway projects are mostly situated in hilly areas, and the cross section of consumers availing the services comes from the average earning socio-economic class of people and a large percentage are villager going on a pilgrimage. For ease of doing business and fast-tracking new / proposed projects, especially for tourism or Urban transport systems, support from the government is needed. in streamlining the process of licensing, permits in construction of ropeway and cable car projects and even those under O&M. The Subsidies like those proposed for Varanasi project of 30 – 40% is a step in the right direction and is needed to bolster this necessary industry.

We are witnessing that a larger number of tenders are being floated, but the government is still focused on promoting CEN standards (European) for validating a ropeway project. Indian BIS standards have been upgraded recently and are very much at par with the CEN standards. Our recommendation to the authorities is to bring hybrid model for certification. Benefits of this hybrid model will go a long way, as it will significantly reduce the cost of the overall projects by at least 15% to 39% without any compromise on the standards of safety or quality. This will ultimately translate into faster RoI, more companies participating in the tenders and ultimately the pricing of tickets born by the customers.”

J Sagar Associates  

“The Union Budget 2022 should aim at the current financial needs of the sector which were overlooked last year. Measures such as reduction of taxes on aviation turbine fuel (ATF), immediate financial aid until the demand fully recovers and financial incentives to the Maintenance, Repair and Overhaul (MRO) industry should be the highlights. ATF ought to be brought under the GST regime (tax rate capping at 18%) to reduce the costs of Airlines. Secondly, exempt/ reduce IGST on the parts (including aircraft components) imported for aircraft MRO to boost MRO business. Incentivise foreign investments in MRO by abolishing the framework of royalties and lease rentals by making it cost-competitive.  Keep the focus on boosting passenger traffic and tap the potential of airports by improving regional connectivity through "Regional Connectivity Scheme/UDAN”.

Sibasish Mishra, Founder CEO, BookingJini

"The hotel business was on the recovery path thanks to domestic tourism, leisure, and events, only to be thrown back into uncertainty by the Omicron threat. It is vital to safeguard the industry during such prolonged periods of uncertainty in business prospects. We interact with hundreds of hoteliers every day, and we've discovered that the industry's main goal is to give hotel owners the status of 'Infrastructure,' since this will solve many the challenges that hotels and hospitality firms face. The step will also help the industry's operational survival and encourage investment in the sector. Access to funding, extended repayment periods for loans, and the resulting reduction in the gestation period will make hotel investments more enticing and sustainable. More hotels would lead to more jobs and growth"

Dilip Modi, Founder, Travel Union

“The travel industry has been severely impacted in the past 2 years and the outbreak of the third wave and the effects of omicron has further hampered the progress of the travel industry. The travel industry is one of the largest contributors to employment in the country. With the current sentiment, the industry needs major support from the government to overcome the challenges brought by the pandemic.

Budget 2022 should focus on lending substantial support to the travel industry. Right now, it is important to revive the industry by taking initiatives that protect small and medium businesses operating in the sector while extending a helping hand to travel agents. Providing tax relief in the TDS & GST applicable to travel agents and SMEs will go a long way in doing just that. We need to build and focus on rural travel as well since it is one of the aspects of the travel sector that needs our focus and investment. Investment in technology can play a pivotal role in bringing the next wave of innovation, employment and development in the travel industry.”