Budget 2023: Hospitality sector eagerly awaits grant of this long-term request

“Industry status is a long-standing demand of the sector. Granting this much-awaited request in the upcoming Budget will help in easier access to institutional credit, increase India’s competitiveness in the international arena and create a long-term path for the sustainable growth of the tourism sector,” Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip

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Industry players hope for reduced differential regulation in Union Budget 2023, as it gives an unfair advantage to foreign entities, thereby impacting India-based companies as well as leading to a loss of tax revenue for the government

The tourism and hospitality sector expects measures in the Union Budget 2023 that will do away with differential regulations within the sector as well as increase the affordability via tax incentives, giving an overall boost to the industry. In addition to this, a predominant sentiment in the hospitality industry is the need for an ‘infrastructure status’. “This is a long-awaited demand of the sector. The industry needs Infrastructure Status to be accorded by the Government of India to enable the hospitality sector to avail long-term funds under the RBI Infrastructure lending norm criteria. This will enhance quality accommodation supply and stimulate higher global and domestic travel demand,” Jaison Chacko, Secretary General, Federation of Hotel & Restaurant Associations of India (FHRAI).

He added, “Although industry status has been accorded to tourism and hospitality by many State Governments, the incentives and privileges associated with the industry have not been conferred to the sector. Industry status will help in setting up a corpus fund to incentivize all States to align policies and set off any losses that may occur.” Moreover, Chacko believes that hospitality should be placed on the concurrent list of the Constitution to make tourism a national agenda, ensuring better coordination between the Centre and the State for fund allocation and implementation of programs aimed at the holistic development of the tourism sector in the country.

Furthermore, the hospitality industry seeks to improve overall affordability by reducing GST rates for hotel and travel bookings from the upcoming Budget. “We would urge the government to reconsider 12% GST being currently levied on room tariffs below INR 1000 per night. With the current geopolitical tensions and inflationary pressures, travel cost has risen. The current rates make it difficult for people to find an affordable stay when traveling, which also negatively impacts the earnings of small hoteliers,” Ritesh Agarwal, Founder and Group CEO, OYO.

According to Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip, differential regulation in the sector gives an unfair advantage to foreign-based entities thereby impacting India-based companies as well as leading to a loss of tax revenue for the government. “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.”

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First published on: 01-02-2023 at 05:00 IST