Mixed bag for travel and tourism sectors

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A mixed bag for the tourism and aviation industry in the Union Budget 2023, according to industry experts and players.

The finance minister Nirmala Sitharaman spoke about an integrated approach during her speech on Wednesday. She announced the development of 50 destinations and construction of 50 airports, water aerodromes and heliports to boost tourism and air travel. She has also proposed to launch an app providing destination specific details along with the concept of Unity Malls, state capitals or prominent tourist destinations which promote local art and craft.

Players across the industry have said that these moves are a much-needed boost for the tourism and aviation industry that has long grappled with infrastructure bottlenecks.

“From an Infrastructure standpoint, this is an expansionary budget. The focus is on maintaining continuity and visibility in government spend, allocating to ministries that will have short- and medium-term impact and have the ability to spend like transport sectors, , crowding in private sector investments , and incentivising state governments to commit to expenditure in the coming fiscal,” said Jagannarayan Padmanabhan, Director at CRISIL.

Whereas ixigo’s Group CEO & Co-founder Aloke Bajpai believes that this move will improve regional air connectivity and benefit travellers from Tier 2 & 3 cities which have seen significant growth in demand for air travel and first-time flyers post-relaxation of restrictions.

Other experts also believe that announcements will create direct and indirect jobs. Porus Doctor, Partner and Consumer Industry Leader, Deloitte India said that with the focus on promotion of tourism will hopefully create more employment for the youth; encourage entrepreneurship; and will impact the sectors.

Travelling turn costlier

On the flipside, the finmin indicated that overseas tour packages could get costlier for travellers. She announced that the tax collected at source (TCS) for overseas tour packages has been proposed to be increased from 5 % to 20%.

This has left travel agents and OTAs unhappy. Jyoti Mayal, President TAAI says, “We’re shocked that instead of abolishing it, the government has raised the TCS. For foreign remittances for other purposes under LRS and purchase of overseas tour program, the TCS rates are proposed to go up which is going to be detrimental for our business.”

Whereas Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip said this move will not only increase the upfront cash outflow for customers but will also give an unfair advantage to foreign-based online travel booking platforms over India-based travel agents and tour operators.

Among things that weren’t given any heed were the request on reduction of taxes on ATF which is a huge deterrent in the aviation industry. Along with this, IATO’s Rajiv Mehra said that demands on rationalisation of GST on tourism industry, exemption of GST on foreign exchange earnings and refund of tax on shopping under Tax Refund to Tourist (TRT) Scheme were unheard.

Read More: Mixed bag for travel and tourism sectors

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