by Vijaylakshmi
In the 2024 interim Budget, Finance Minister Nirmala Sitharaman allocated INR 2,449.62 crore to the tourism sector, signaling a substantial 44.7 percent increase from the revised allocation in the current fiscal year. This marked a significant improvement over the 2023 Union Budget, initially set at INR 2,400 crore for the tourism ministry and later revised downward to INR 1,692.10 crore.
With the industry experiencing a surge in travel, the upcoming Budget announcements later this month are eagerly awaited by stakeholders in the tourism sector.
Hotel operators, who significantly downsised their workforce during the Covid-19 pandemic, are now actively hiring to support expansive growth plans and address high turnover rates in India. Over the next 12-18 months, an estimated 200,000 jobs are anticipated to be generated in the hotel, restaurant, and tourism sectors, as per TeamLease Services, a staffing services firm. This surge in employment comes as hotels expand their capacities, open new locations, and experience robust demand from both business and leisure travellers.
Glenn Fogel, the global chief executive of Booking Holdings, emphasized the global travel industry’s keen interest in India. He highlighted the government’s substantial investments in tourism infrastructure and resources, including airports, underscoring India’s potential as a pivotal market.
In such a scenario, it becomes interesting to see what Finance Minister Nirmala Sitharaman has to offer to the tourism industry in the upcoming Budget for this fiscal year.
Why India’s Upcoming Budget Needs to Provide for More
India’s burgeoning domestic travel sector presents a compelling case for increased budgetary allocations. With robust growth expected in both travel expenditure and air passenger traffic, strategic investments in infrastructure, connectivity, and tourism initiatives are imperative. Adequate budget provisions can not only foster economic growth but also bolster job creation, enhance tourism infrastructure, and capitalize on India’s potential to become a global leader in domestic travel markets.
India presently stands as the world’s sixth-largest domestic travel market in terms of expenditure. Fuelled by the expanding middle class, which drives an annual growth in travel spending of about 9%, India’s domestic market has the potential to surpass both Japan’s and Mexico’s to secure the fourth position globally by 2030, as indicated by a McKinsey & Co. report. Moreover, projections suggest that domestic air passenger traffic in India could double by 2030, supported in part by a government-subsidised initiative aimed at enhancing connectivity to underserved domestic airports.
Budget Expectations – Make the trip
As India gears up for the Union Budget 2024-2025, Rajesh Magow, Co-founder & Group CEO of MakeMyTrip, underscored the critical opportunities awaiting the travel and tourism sector. Post-pandemic recovery has shown robust growth in this industry, setting the stage for strategic investments that could propel economic growth, boost employment, and enhance India’s competitive edge in tourism.
A key concern highlighted by Magow is the tiered GST structure for hotel room tariffs, which leads to price discrepancies based on seasonality. He advocates for a simplified GST regime with a uniform rate of 12% on hotels, aiming to streamline compliance and reduce operational complexities.
Online travel agents (OTAs) face regulatory challenges with state-wise GST registrations, necessitating physical presence in each state. Magow urges the Finance Minister to allow OTAs to register centrally, easing administrative burdens and leveling the playing field against international competitors.
Another disparity addressed by Magow is the GST treatment between ecommerce operators and suppliers in the domestic market. He calls for parity in GST charges, citing the current advantage held by direct bookings over ecommerce platforms, which he believes contradicts India’s digital ambitions.
Tax reforms in budget
Moreover, Magow emphasised the need for tax reforms affecting travel agents and tour operators collecting Tax Collected at Source (TCS) on Overseas Tour Program Packages (OTPP). He proposes allowing TCS credits against salary income tax under Section 206C(1G), providing relief to taxpayers and promoting efficiency in tax management.
Addressing overcrowding at popular tourist destinations is another crucial area for the Finance Minister’s attention. Magow suggests incentivising CSR investments from corporations into tourist site development, offering tax benefits to foster sustainable tourism practices and enhance visitor experiences.
Magow advocates for tax incentives to hotels and homestays adopting sustainable practices aligned with UN Sustainable Development Goals. By encouraging eco-friendly initiatives like energy-efficient technologies and waste reduction measures, the Finance Minister can support India’s commitment to global sustainability goals while driving economic growth in the tourism sector.
Magow’s recommendations underscore the potential for the Union Budget to transform India’s travel and tourism landscape through strategic policy interventions that promote growth, efficiency, and sustainability.
