Union Budget 2023-24 Hospitality industry seeks infra status, incentives, tax relief
Life & More spoke to a different players in the hospitality sector, including travel and tourism about their expectations from the Union Finance Minister Nirmala Sitharaman in the forthcoming Union Budget. While different stakeholders have their different concerns, one demand which is common to all is more support from the government and less of taxes. Read 0n:
Alapati Krishna Mohan, MD, Southern Travels
The travel & tourism sector has gone through a two-year-long lean period during the pandemic. After two years of struggle, the industry witnessed sunny days in 2022. The government of India has also taken good initiatives in the past by allocating INR 2,400 crore, i.e., an 18.42 per cent rise from FY 2021-22. Various market reports claim that the industry has tremendous growth potential, and it is projected to reach USD 125 billion by FY27. Amidst this transitional scenario, industry players once again expect a balanced budget considering their few demands, such as taxing real income and not notional income and rationalization of multiple GST Rates into 2-3 tier GST rates.
Tourism Industry is earning foreign exchange for the country, may be accorded with the status of “Export of services” and accordingly
all the export benefits to be provided. At present E-Invoicing is mandatory. It is recommended that the government should formulate a well-defined procedure for refund of IGST paid by the tourists leaving India on supply of goods taken out of the country as a
part of the baggage. The exemption is significant as the industry is still in the recovery mode and by that time staff
strength employed by the tour operators will increase.
Nishant Pitti, Co-Founder & CEO, EaseMyTrip
There are several tenets of the industry which are expected to benefit from the upcoming Budget session. The entire travel and tourism industry is still in the process of recuperating from the major blow that it faced when Covid-19 struck. As the pandemic becomes endemic, it is important for both the central and state governments to work in tandem to facilitate this sector and support it. For starters, the government could include travel and tourism in the concurrent list to provide it with industry status, which will help in making it more structured. A greater focus on the industry’s revival is required, which can be done by implementing an e-visa fee waiver for tourist visas, and domestic income tax travel credit for Indian citizens and Indian companies. The Emergency Credit Line Guarantee Scheme (ECLGS) should also be extended to tourism and hospitality. In addition to this, we are also hoping that with the upcoming budget, the government will strive to increase the disposable income of the middle classes to aid the rise of discretionary spending. This can be done by taking concrete steps should be taken to improve the cash flows, enable access to easy credit, and reduce the income tax rates and GST tax rates.
Sunil Gupta, MD & CEO, Avis India
Travel and tourism have always been important contributors to the country’s GDP. During Covid, this sector was among the worst affected and is still far from pre-Covid levels. It is also a big generator of employment and in the current context of high unemployment, supporting this sector will pay rich dividends to the economy. It, therefore, behooves the government to give a special thrust to this sector. The upcoming Union Budget offers the government the perfect opportunity to do so by formulating provisions that aid the sector to recover from the losses it has borne during the last couple of years. As a travel-oriented business, we expect higher budgetary allocation to infrastructure to promote travel. We are also looking forward to the government granting industry status to the travel and tourism sector, which will help in the regularization of policies and processes and better access to finance. Measures like rationalization of taxes, reduction in indirect taxes and related exemptions could also benefit the sector to a great extent by creating a favorable environment for people to spend their disposable income on travel. The introduction of soft loans with lucrative terms can also act as a
stimulant for the sector, which is still on its journey to post-pandemic revival. We expect that the upcoming budget
announcement will lead the sector towards a period of prosperity.
Harsha- founder & CEO at AllFive
By the end of 2023, the travel & tourism industry is expected to touch the $14.92 billion mark. With a 52.19 per cent hike in the number of travellers in 2022 compared to 2021 we expect the budget to rise more than 22 percent for our Tourism and Culture Ministries. We expect the government to announce impactful incentive measures for areas of Capacity Building for Service Provider and Loan Guarantee Scheme for Tourism Services Sector. Most of these Service Providers do not have the tools to get themselves started or get themselves online hence increase in budgets to provide such services will create a significant rise in the economic growth through
tourism – domestic & international.
Vandita Purohit, Founder, TraWork
The travel sector is surging and flourishing now and I believe this will continue. What the budget can consider is investing in the tourist places and the infrastructure there to facilitate better experiences and thereby better business. That will help the travel ecosystem, and the tourism industry and further our economy where tourism plays a vital role. There are heritage sights and monuments that can help increase tourism in India but are unexplored due to poor infrastructure. The budget can work on redeveloping these sights, and the roads and make them better accessible. So, consciously investing in the tourism sector, can be one of the areas of focus in this year’s budget.
Ramit Sethi, Founder, Seclude
The present GST rate for Homestays is graded at 12 per cent to 18 per cent based on room tariffs. This should be singularly made into 12 per cent across all room rates to promote the homestay and boutique property ecosystem, which is a fast-growing category and growth driver within the hospitality and tourism industry. The licensing of homestays and resorts should be made simpler, with a single-window clearance system that can be created to promote ease of doing business. We also recommend that there should be
incentives given to homestays that hire local staff in terms of ESI/ EPF benefits.
Rohit Sethi, Founder, Seclude
According to the Ministry of Tourism in the last budget of 2022-23 INR 2400 CR was allocated which was 18.42 per cent higher than the previous year. We encourage this upward trend as Tourism is a significant contributor to GDP and jobs. Invest India estimates that by 2030, USD 250 billion, 137 million jobs, USD 56 Billion in foreign earnings will be generated by 2030. However, only a small fraction of this is allocated towards small tourism units. Homestays and boutique properties have huge potential to help preserve local culture and vernacular architecture which can aid in creating a completely new and authentic guest experience. As per a Noesis Report, there is a need dire need for more than 2.5 million additional rooms in the homestay category and we feel that the creation of a special fund, relaxation in licensing rules, and tax incentives would really benefit individual homestay owners, especially in rural and remote areas. “
Dhruv Shringi, Co – Founder & CEO, Yatra.com
This budget is surely an opportunity for the government to take corrective measures to boost the overall health of travel and tourism industry. The main endeavour in the Union Budget 2023-24 should be to increase disposable income in the hands of the consumer which can further be channelized to boost domestic travel and the numerous local ecosystems. Furthermore, we look forward to targeted incentives to boost foreign tourism in India, which is yet to realise its full potential. Considering foreign visitors have greater spending power, they have a more significant influence and impact on the industry as a whole. On the GST front, tourism services
provided to the foreign nationals should be eligible for GST exemption along with bringing ATF under the GST ambit
to provide relief to the airlines sector.”
Pranav Maheshwari, Co-Founder, StayVista
Staycations have become one of the biggest holiday trends post-pandemic. Private villa rentals are now the go-to choice for large friends and family groups, looking to take a quick break and with more affluent Indians buying second homes, the category is poised to hit revenues of $1.8 billion in 2023. Following the two brutal pandemic years, the hospitality and travel industries need
support and attention. Therefore this year, in particular, we anticipate provisions and initiatives focusing on
homestay villa regulations and tax procedures.”
Mehul Sharma, Founder & CEO, Signum Hotels & Resorts
The good days have returned, and the hospitality sector has recovered like never before. We anticipate wonderful few years ahead. Therefore, the hospitality sector must inevitably benefit when the economy grows.The hospitality business anticipates receiving a consistent industry status from the government across the nation. Only a few states today have declared this status for us along with some excellent initiatives to support the hotel sector. However, not all states operate in this manner. Similar regulations should be implemented by the national government, which will significantly aid the industry’s expansion. We must keep in mind that this industry supports a large number of jobs, and its success has a positive multiplier effect on the economy. The hotel industry has recovered from the effects of the pandemic, but it is concerned about the high rates of the goods and services tax (GST) on hotel rooms and the government’s lack of help in the most recent budget (2022-2023). Also, to give us with long-term loans, we ask the government and the ministry of finance. There is a significant gestation phase in the hotel industry, which means it takes three to four years to build a hotel, another two to three years to stabilize, and then the repayment period begins, which is very stressful. Hotel loans therefore have a 15 to 25-year term internationally. The hospitality sector in India should adopt a similar structure as well, as doing so will likely result in fewer
NPAs and other problems than in the past.Also, government should work upon making LTC mandatory and introduce policies and benefits for single female travelers. The Government should also work towards incentivizing people to travel.
The Government should also look into making visa processes easier to our country.
Tushar Parihar, Founder, Kaner Bagh
The surge of taxes and GST has led to a lot of drawbacks in the hospitality industry. The budget 2023 should look at some rebates
in the taxes so that it’s easier on the pockets of the industry. The rebate of taxes will also help in increasing tourism and
help the hospitality sector. The Government should also look at investing in tourist places as development in this sector
can indirectly help the hospitality sector grow.
Sandeep Singh, MD, Rubystone Hospitality & Goldstone Hotels
We seek infrastructure status for the hospitality industry and classifying hospitality under the RBI Infrastructure by lending norm criteria for access to long-term funds to improve the supply of high-quality accommodations and, as a result, stimulate greater domestic and international travel demand. Currently, only hotels built with an investment of Rs 200 crore or more have been accorded infrastructure status. To boost the budget category in hotels, this criterion needs to be lowered to Rs 10 crore per hotel as then hotels will be able to obtain term loans with cheaper interest rates and longer repayment terms. Many State Governments have given hotels industrial status; nevertheless, the rewards and advantages that come with being an industry have not been granted. A higher inflow of both domestic and international tourists will increase demand and, in turn, further boost confidence in Capex spending in the tourism industry, contributing to structural employment growth. The lower cost of operations, spread over a longer payback period, will reduce the cost of supply, thereby increasing demand. To pass effective legislation to turn tourism into a national priority, we also seek that it be added to the concurrent list of the Indian Constitution. The states will be encouraged to harmonize their regulations if the Center declares tourism and hospitality as an industry and places them on the concurrent list. It will provide improved cooperation between the State and the Center for funding distribution between projects and programs, implementation geared towards the all-round development of the nation’s tourist industry. High-quality brownfield Capex and capacity development will greatly benefit from the extension of investment-linked benefits under Section 35 AD to ongoing hotel and resort capital expenditures, which will speed up investment and employment in the industry. As of now, only new two-star hotels and above-category hotels are eligible for this bonus under Section 35 AD.
Teja Chekuri, Managing Partner, Ironhill India
The F&B industry was one of the hardest hit sectors during the pandemic and though things have improved since then and people have thronged to restaurants, there is still scope for growth. We are hoping that in this budget, some critical issues such as the introduction of ITC (input tax credit), liquidity focussed credit lines and single window clearance for all restaurant licenses will be looked into.
As per a report by NRAI, about 25 per cent of food businesses shut down during the last financial year resulting in 24 lakh job losses. Considering that this sector employs about 73 lakh people, apart from those in ancillaries and the gig economy segment, the sector
could do with a high degree of support. Being one of the highest employment generator segments in the country we would like to work hand in hand with the government to ensure that we tackle the issue on unemployment as well as revenue generation, in every way that we can Considering, the fact that the government has been progressive and is improving the business ecosystem constantly, our hope remains the same this time around – that the ease of doing business in the F&B segment in the country is improved on, and that
there are healthy regulations in place so that we may continue to generate employment as well as income for the government.
Any measure that helps us become a profitable venture could attract domestic as well as foreign institutional investors
to the segment, which could bode extremely well for the economy.
Sarbendra Sarkar, Founder & MD, Cygnett Hotels & Resorts
The Union Budget 2023-2024 should introduce policies that incentivize new hotel openings, particularly in remote areas such as North East India. Additionally, a new tourism policy should be declared in the Union Budget, which has been long overdue. The government should also promote the use of renewable energy resources in the hospitality sector, as India has committed to achieving net-zero emissions by 2070. Considering that there is a huge gestation period for new hospitality projects which means that building a hotel takes around 3-4 years, the Union Budget should announce long-term loans for the sector and give the hospitality industry the industry status.
Asif Fazlani, MD, Fazlani Nature’s Nest
The year 2023 is set to be a pivotal year for India’s tourism and hospitality industry, as we anticipate a strong recovery from the pandemic-induced slump. I expect that the government will announce a free e- visa scheme for the five lakh international tourists similar to what has been done in the past. It will help us to promote our property in key overseas source markets. Additionally, wellness tourism has become a major travel vertical, and India, being the land of Ayurveda and Yoga, needs a dedicated strategy to promote it. I hope the government will announce some marketing plans for wellness tourism in the Union Budget. Furthermore, policy changes should be considered to help hospitality players access cheaper loans and have a longer moratorium period so that the sector can thrive and create employment opportunities.
Paritosh Ladhani, Joint MD, Sincere Developers owns Taj Hotel & Convention Centre Agra
The hospitality sector in India is a major source of employment. Unfortunately, the indirect tax regime is quite severe. If the GST rate was set at 12 per cent for all room categories, it would create more demand, provide more jobs and generate more revenue. This would be a good start, but it would not be enough to make us competitive on a global scale. To achieve this, the GST rate should be reduced further, ideally to below 10 percent, with full set-offs in line with international standards.
Ashish Sidhra, Co-Founder, Alike.io
The Union Budget of 2022-23 increased the Tourism sector allocation by 18.5% to USD 309 million. Similarly, there have been multiple policy interventions as well to enhance the growth velocity of this critical sector. We positively anticipate the Government to build upon on this momentum in the upcoming budget. Specific areas that we would be eager to see some movement are around provisioning for 10 per cent SEIS (Service Exports from India Scheme) combined with export status for forex earned for travel services as well as abolition of TCS on travel services. Another critical area for Tourism in India is digitisation of tourism experience providers, where tourists can book tourist experiences online with ease and comfort, instead of the hassle of finding, haggling, and buying these services last minute at the venue. Globally tourism experience digitisation stands at around 20 per cent but in India this is at a low single digit number. We look forward to policy support and tax benefits for companies investing in standardising and digitising this critical component of traveller experience. Additionally, the quality of experience for the tourist in India will be driven by the guides/ experience providers on ground. This is an area where we believe a policy and regulatory intervention will go a long way in expediting improving the travel experience of the tourists in the country by promoting and incentivising skill development and certifications.
Shankey Bhardwaj, CEO & Founder, Social On Social
We expect the government to increase the allocation for infrastructure development to promote travel, with a goal of boosting the industry’s revenue back to pre-pandemic levels within the next 2-3 years, to the tune of $10-15 billion. The travel and tourism sector should be granted industry status, which would lead to the regularisation of policies and better access to finance, worth around $5-7 billion. We also expect rationalisation of taxes and reduction in indirect taxes, aimed at creating a favorable environment for consumer spending on travel, with potential savings of $2-3 billion besides introduction of soft loans with attractive terms, to provide a stimulus for the industry’s post-pandemic revival, worth approximately $5-7 billion. Further, to encourage travellers to embrace digital India at the grass-roots level the disparity between online and offline bookings should be reduce, which would lead to a more level playing field and potential savings of $1-2 billion. The government must also redevelopment heritage sites to make them more accessible, which could help boost the tourism sector, with investments estimated at $5-7 billion.
Nikhil Kapur, Co – Founder & Director, Atmantan Wellness Centre
Considering hotel projects have long term gestation, having long-term funding of 15-20 years will help in giving the promoters some cushion in being able to position and promote their unique concepts. When the duration of borrowing is short, no one wants to take a risk and everyone plays with the plain vanilla offerings – business & leisure while travel is-multi dimensional and includes wellness, adventure, nature, wildlife, sports, spiritual as well. Secondly, the international travel sentiment remains poor for the next 9-12 months. This is
due to the Geo political stress in the West. Hence, there is an urgent requirement for the government to extend all the EPCG licenses
for another five years to help tide over the situation. Lastly, we expect lowering the GST to 12 per cent at least for a period 3-5 years as a gesture to overcome the pandemic stress and the airport infrastructure needs to be upgraded, both for domestic and
international travellers as people don’t like the stress at the airports when they want to relax on a holiday.
Now, with regard to wellness tourism, the government should incentivise individuals who are imbibing preventive health care & natural healing into their daily lives. These individuals who are in good health by and large don’t add to the already stressed medical infrastructure of the country. Hence, when these individuals travel to NABH accredited wellness centers or subscribe to online health plans, they should be rewarded with lower insurance premiums, LTA benefits etc.
Jaikar Singh, Director, Symphony Resorts, Andaman and Nicobar Islands
There are various facets within the hospitality, travel and tourism industries that we hope to be addressed this Budget. First and foremost, we are looking forward to the government granting industry status to the travel and tourism industry. This move will help in the regularisation of procedures and provide improved access to financing. Additionally, steps like tax rationalisation and indirect tax reduction could potentially have a significant positive impact on the sector. Furthermore, as of today, hospitality companies are required to obtain multiple approvals and licenses before they are scheduled to operate. We are hopeful that the government will expedite this procedure and implement a single window clearance for all licenses and approvals. And lastly, we hope that the Union Budget would include measures to incentivize new hotel openings in remote regions such as Andaman and Nicobar Islands.