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The domestic tourism sector, which suffered a major setback during the pandemic, got a push from the Union Budget, with Finance Minister Nirmala Sitharaman proposing integrated development of 50 destinations. Overseas trips, though, are set to get dearer with the government hiking the rate of tax collected at source (TCS) to 20 per cent from 5 per cent.
Income tax is collected and paid on remittance made for a foreign tour, hotel booking or hiring a car overseas, even if purchased individually. International air tickets purchased directly by travellers will not attract TCS.
The Finance Minister has provided an outlay of Rs 2,400 crore for the tourism sector in 2023-24. This is equal to the 2022-23 budget allocation. In the revised budget estimate for 2022-23, the allocation was reduced to Rs 1,343.13 crore.
Tourism sector has been included as one of the focus areas with Sitharaman saying that “tourism promotion will be taken up on a mission mode with active participation of states, and through public-private partnerships (PPPs)”.
Sitharaman said that at least 50 destinations will be selected through “challenge mode”, and overall tourist experience will be developed with physical and virtual connectivity. “Every destination would be developed as a complete package. The focus on development of tourism would be on domestic as well as foreign tourists,” Sitharaman said in her speech. Amenities will be developed in border villages too.
Additionally, states would be encouraged to set up a Unity Mall for promotion and sale of GI (geographical indication) and other handicraft products.
The industry expressed mixed feelings about the Budget as some of the demands for tax concessions or industry status were not addressed in the Budget.
“The Budget entails multiple welcome initiatives like the revival of 50 airports, building of 50 new destinations, and high budgetary outlays on railways and highways which will help long term growth for the domestic travel and tourism industry,” said Rajesh Magow, co-founder and group chief executive officer, MakeMyTrip.
“However, one proposal that will negatively impact the industry is the move to increase the TCS mandate from 5 per cent to 20 per cent on overseas tour packages. This will not only increase the upfront cash flow for customers but will give an unfair advantage to foreign-based online travel booking platforms over India-based travel agents and tour operators,” Magow added.
“This proposal needs to be rolled back immediately,” said Rajiv Mehra, president of Indian Association of Tour Operators. “It will kill the business of local travel agents and force customers to bypass us, and book directly overseas thereby causing loss to government exchequer,” remarked Guldeep Singh Sahni, former president of Outbound Tour Operators Association of India.
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