Finance Minister Nirmala Sithraman is scheduled to introduce the Union Budget 2023-2024 on 1 February 2023. The travel, tourism, and hospitality sectors anticipate a large number of industry-specific incentives. Among their demands are tax exemptions and benefits, infrastructure status, and incentives.
Mr. Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip, commented that the Indian travel and tourism industry has demonstrated remarkable resilience and bounced back from the pandemic’s impact. Domestic leisure travel has risen much beyond pre-pandemic levels, however long-distance foreign travel continues to lag. At this critical juncture, the government’s support is required to ensure that the industry continues to be one of the country’s foremost employers.
Mr. Rajesh Magow elaborates on major requests for the travel and tourism industry:
Differential regulations impacting India-based travel companies and start-ups
“The current taxes and compliance structure has created an imbalance as they affect Online Travel Agencies (OTAs) located and operating a permanent establishment in India. For instance, a direct tax provision mandates the collection of 5% TCS with PAN and 10% TCS without PAN from the customer of an overseas travel package from any online e-commerce entity. This allows foreign-based OTAs to offer lower costs to Indian citizens because of the non-applicability of GST or direct taxes. No KYC process by foreign entities adds to the attraction for a section of Indian travelers. We urge the government to review the differential regulation as this gives unfair advantage to foreign based entities thereby impacting India-based companies as well as leads to a loss of tax revenue for the government.“
Offer level playing field for offline and online bookings for bus and hotel bookings
“With India’s focus on becoming a digital economy,the disparity between offline and online bookings should be done away with to motivate all travellers to embrace digital India at the grass-root level. Currently, the customer pays a 5% GST charge when booking a non-AC bus through an online platform. This charge is zero for an offline booking. The disparity is similar in the case of an online booking of unregistered hotels and homestays.“
Requirement for obtaining registration all states/UTs should be done away with
“India’s rank in ease of doing business as improved significantly, and in the same spirit, the requirement for an OTA to register in all states/UTs should be reconsidered. The current GST law requires OTAs to have a physical presence in all states and union territories. It means having 36 offices, GST registrations, and tax-collection-at-source (TCS) to offer services across India. In addition, the OTAs are supposed to file 100-plus returns a month.“
Infrastructure status for the sector
“This is a long-standing demand of the sector. Granting this much-awaited request of the travel & tourism sector will help in easier access to institutional credit; will increase India’s tourism sector competitiveness in the international arena and create a long-term path for the sustainable growth of the sector.“
Exports Status for Tourism Earnings
“Travel contributes significantly to the services sector in India and generates employment for millions. To recognise this contribution to society and the economy, we suggest that tourism exports be treated at par with other exports and services and such transactions may be zero rated for GST without stopping the flow of input credits.“