by: Anil Mathur – eTN India |
Specifically, IATO President Mr. Rajiv Mehra has written to the Prime Minister requesting him to restore the Service Export Incentive Scheme (SEIS). As an alternative to this, IATO suggested the introduction of a scheme in the new Foreign Trade Policy, as the inbound tourism sector is still suffering and needs hand holding by the government. Additionally, the Association seeks roll back of TCS of 20% to 5% on Overseas Tour Packages announced in the Union Budget.
The letter states that these steps would place the tourism industry at par with foreign tour operators and help them compete with the neighboring countries. During the current G-20 presidency, where promoting tourism is one key objective, it would be pertinent that the government extends a helping hand to the tourism sector.
In the letter, Mr. Mehra mentioned that the inbound tourism industry of the country was the worst affected due to the COVID-19 pandemic. Post revival of international flight operations and the tourist visa have witnessed only a 30-40% revival of inbound tourism to India, which the government accepts. Because of this, IATO states that either SEIS should be restored or an alternative scheme benefiting the tourism sector should be announced in the Foreign Trade Policy 2023.
In the letter it has been stated that it took 9 years to increase foreign exchange earnings to 30.05 billion in 2019 from US$14.49 billion in 2010. However, at present these figures have gone back to the 2004 level, which was 6.17 billion in terms of foreign exchange earnings. This is indicative of the stress this sector is undergoing.
Today, the sector needs support, and surely the government would favorably consider this request.
According to Mr. Mehra: “We need to compete. But it becomes very difficult as the government has withdrawn marketing and promotion support in foreign countries. [With] ended SEIS, [and] not given any alternative benefit, GST is as high as 20-23%without any input tax credit, whereas neighboring countries are charging 6-8%. To attract tourists, we need to holistically look at all these issues. As regards the argument of revenue loss – it would be made up more than 100 times as it has a positive multiplier impact on the overall economy.”
Mr. Mehra also mentioned that the increase in the Tax Collection at Source (TCS) rate from 5% to 20% starting July 1, 2023, is causing loss to outbound tour operators based in India. The traveler would simply bypass the Indian operator and book outside; it will be a lose-lose situation both for government and tour operators. This needs to be brought back to 5% as was before or even lower, he said.
The letter states that nothing matches the tourism sector in terms of employment generation and the contribution it makes to the economic growth of the country.
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