The Union tourism ministry may ask for a revision of the Goods and Services Tax (GST) for the tourism industry, and that earnings of the sector be made tax free for the next six months in view of the losses it has incurred due to the global coronavirus disease (Covid-19) pandemic, according to officials familiar with the matter. The ministry had sought recommendations for the sectory from industry bodies, including the Indian Association of Tour Operators (IATO), Federation of Associations in Indian Tourism and Hospitality (FAITH), World Travel & Tourism Council, and the Confederation of Indian Industries on March 19.
The ministry will send these recommendations to the Union finance ministry’s task force with a request to include tourism as one of the sectors that need a financial bailout, said a ministry official requesting not to be named. The foreign exchange earned by the sector in March 2017 was Rs 14,667 crore, Rs 17,222 crores in March 2018 and Rs 16,125 crores in March 2019. April forex figures for the years 2017 was Rs 14,260 crores, Rs 15,620 crores for 2018 and 17,061.
In the domestic trade, which accounts for the major chunk of the trade, over 1.5 billion tourist visits are clocked in annually. In 2016 there were 1.61 billion domestic visits, 1.67 billion in 2017, and 1.85 billion in 2019. In 2019, 10.89 million foreign tourists visited India as per tourism ministry data. And forex earning in 2019 stood at Rs 2,10,981 crore.
The GST Council tweaked tax slabs for the industry in September last year. The GST for rooms with tariffs of Rs 7,500 and above was brought down from 28% to 18%, and for rooms that cost between Rs 1,000 and Rs 7,500 from 18% to 12%. According to FAITH, around 4,500 hotels are being unable to run because of the pandemic. Subhash Goyal, chairperson of industry body Assocham’s Tourism Council and honorary secretary of the FAITH, said that the estimate is from members of hotel consortiums. Of the 4,500 hotels, 3,500 have shut down completely, he said, while many of the rest are running with skeletal staff.
“Of those that still have jobs, most are working without pay,” said Goyal, warning that there may be massive layoffs unless a bailout package is announced. Pronob Sarkar of IATO said that since April-July are low months, the industry depends on earnings made between December and March. “With closedowns in March, people are functioning with reduced pay. If there is no bailout, we are staring at job losses of lakhs,” said Sarkar.
The associations havewritten letters to Prime Minister Narendra Modi and Union finance minister Nirmala Sitharaman last week seeking an immediate intervention. They have estimated losses in excess of Rs 5 lakh crore to the tourism industry and almost twice that allied economic activity. “As a result of this pandemic, the Indian tourism industry is looking at pan-India bankruptcies, closure of businesses and mass unemployment. It is believed that around 70% out of a total estimated workforce of 5.5 crores (55 million direct and indirect) could get unemployed,” the letter written to the PM reads.
In the letter, the industry bodies have asked for a moratorium of 12 months on EMIs and interest on loans from all financial institutions, as well as the doubling of working capital limits. They have demanded a deferment by a year for payment of all dues such as GST, advance tax payments, Customs duties, and a fund to support salaries.