Travel industry calls for tax reductions and incentives

The travel and tourism industry in India is facing a severe crisis due to the ongoing impact of the covid-19 pandemic. With no stimulus package in sight, industry players are urging the government to provide concessions and incentives to help revive the sector.

The Indian Association of Tour Operators (IATO), representing over 1,600 operators for inbound tourists, has called for the exemption of the tourism sector from the integrated goods and services tax (IGST). They argue that similar to the IT industry, which provides services to international clients and brings in foreign exchange without paying this tax, the tourism sector should also be granted this exemption.

According to industry estimates, the travel and tourism sector has suffered losses amounting to ₹90,000 crore. This sector contributes significantly to the country’s GDP, accounting for 9.2%, and employs 8.1% of the population, with a total contribution to forex at approximately $28 billion.

IATO has also highlighted the burden of multiple tax systems on tour operators, who have to pay taxes at rates between 18% and 23% on various services. They have requested the government to either lower the GST rate or allow input tax credit to alleviate the impact of these taxes.

Additionally, the industry is seeking government support in the form of soft loans, income tax concessions, payment of overdue benefits, and easing of indirect taxes to aid in the recovery of the sector in 2021. With the ban on international commercial flights extended, the focus is now on promoting domestic tourism and providing the necessary support to boost the industry.