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Thursday, October 5, 2023

FAITH Proposes Tourism Aid & Restructuring Package to Government


FAITH- Federation of Associations in Indian Tourism & Hospitality, the policy federation set up by the national associations(ADTOI, ATOAI, FHRAI, HAI, IATO, ICPB, IHHA, ITTA, TAAI, TAFI) proposes Tourism Aid & Restructuring Package to the Tourism Minister to seek specific measures for Indian Tourism from the Prime Minister and from the Finance Minister. 

Tourism Aid & Restructuring Package is a comprehensive six steps plan which address both supply and demand measures

Step One: Tourism Fund
Step Two: Option of a Drawdown against Income Tax & GST
Step Three: Tourism Tax & Statutory Holiday for FY 2020-21
Step Four: RBI Support
Step Five: Specific stimulus to different segments of Indian tourism 
Step Six: Agenda for National Tourism Task Force

Step One: Tourism Fund

Tourism Fund Similar to the ₹ 90000 crore fund that has been set up for discoms as was announced in the stimulus package, FAITH requests to set up a Tourism COVID 19  fund of a minimum ₹50000 crores for enabling the tourism industry to meet its salary & working capital. Considering the punishing conditions for Indian Tourism which have arisen from this pandemic, this fund is proposed to be an interest and a collateral-free fund with principle payable over 10 years including a moratorium period of 2 years.  To fast track disbursement, they have requested it to be disbursed directly from the Ministry of Finance (MOF) against the PAN Card / GST number of tourism, travel & hospitality enterprises. This is not a grant as the principle amount will come back to the Government and it will enable Indian tourism enterprises to stay viable and protect the tourism jobs. 

The proposed MSME fund which was announced in the stimulus package is an encouraging move for conventional MSME enterprises but it may not help the majority of the tourism enterprise in its current form. 

  • There is no moratorium on interest and it is based on the assumption that cash flows will restart post lockdown which may happen for other sectors but will not be the case for most tourism companies.
  • The collateral-free loan requires an existing ‘loan relationship’ with banks & financial institutions and thus is not extendable to new borrowers a condition which is not favourable. 
  • It has a cap of 20% of the existing outstanding which is not sufficient to run a tourism enterprise for the rest of the financial year. 
  • It also puts a cap on turnover which excludes larger tourism companies.
  •  Its interest rates are almost 500 basis points + above the repo rates which are too steep for any tourism enterprise to service.

Viable tourism business will not restart for almost up till the next fifteen months post the lockdown. Hence with these restrictions most tourism enterprises may find it difficult to sustain through this proposed MSME fund. 

Step Two: Option of a Drawdown against Income Tax & GST
FAITH proposes to Extend the option of a 7-year loan equivalent to the cumulative Income tax and GST of the past two years (FY 18-19 & 19-20) paid by the respective tourism, travel & hospitality enterprises. This can be paid back over 7 years including a moratorium of 2 years on both principle and interest. To fast track disbursement, they have requested it to be disbursed directly from the Ministry of Finance (MOF) against the PAN Card / GST number of the tourism enterprises. MOF has all the data of each tourism company vested with CBDT & CBIC to facilitate the same. FAITH has requested the interest to be capped at repo rate as it exists currently in May 2020 and the interest to be spread out and funded as a term loan over the period of 7 years post a two years moratorium. 
Step Three: Tourism Tax & Statutory Holiday for FY 2020-21
Due to significantly reduced travel in FY 2021, there will hardly be any tourism business and thus there are not going to be significant tax collections either through income taxes or through GST. It is thus necessary to stop the clock on government statutory payments for FY 20-21 for tourism. 
To restore confidence in the tourism sector, FAITH has proposed to declare FY 20-21 as a tourism tax-free year both for income taxes and for GST. Additionally, this can be extended to all statutory dues payable by tourism, travel & hospitality industry at the Central Government level, without attracting any penal interest. These could include GST, Advance Tax payments, PF, ESI. 
For GST, the input tax credits should be continued to release cash flows for tourism enterprises.  They have also requested that there is no additional tax levies or cesses be added to the tourism sector of the likes of a Corona cess.

Step Four: RBI Support
While RBI has been very proactively announcing monetary policy measures to help corporations for tourism FAITH has requested a sector-specific impetus. Unlike other businesses, tourism will not demonstrate any cash credible cash flows post lockdown or during FY 20-21. 
The moratorium from the current six months is extended for 12 months. The interest component is currently being provided for payment at the end of FY 21 as FITL. It is requested that for the tourism sector this FITL be maybe payable over 7 years. 
Historically too RBI has stepped in to undertake FITL of 7 years for industries that were under stress. During 2001, RBI had made a provision of FITL for the wood and panel industry of the North East region for 7 years.  

FAITH has also requested for a one-time restructuring of all tourism outstandings that may be permitted for those enterprises who may wish to avail.
FAITH has also, through RBI, requested that banks & FIs may be requested to adopt a lenient stance & outlook on the tourism, travel & hospitality industry (travel agents, hotels, tour operators, tourist transporters, restaurants, guides, tourism infrastructure & tourism services) 

Step Five: Specific stimulus to different segments of Indian tourism 

For Domestic tourism demand will have to be incentivised through both private and corporate travel. Incentivise the Indian corporates for holding meetings, conferences, events in India with a 200% weighted tax deduction of their expenses. Incentivise Indian citizens for holidaying within India by enabling their holiday expenses deductible against income tax. These could be a deductible expense for e.g. of up to ₹ 1.5 lakhs. The expenses could be tax-deductible by producing verifiable invoices of GST registered tourism travel & hospitality vendors of India.  
They have cited the example of Japan Government which has just declared a tourism stimulus of yen 1.7 trillion and has launched the “Go To Campaign,” where their government will subsidize half of the domestic travel costs up to ¥20,000 per night and issue holiday coupons. 

To boost foreign exchange earnings from tourism. Increase the value of SEIS to 10% across all tourism, travel & hospitality companies for a consistent policy period of 5 years.  The SEIS should be enabled at gross FEE and not at net FEE as there will be far higher expenses of promotion and market development now. Additionally, during off-seasons there could be made a provision to add an additional 5% to the base rate. There also needs to be a one-year extension of all existing scrips from their validity period in 2020. The extension of SEPC Membership should be enabled for Fee 21. 
To prevent Indian travel agents from becoming globally uncompetitive abolish the implementation of the TCS as proposed for  ‪October 1. Implementation of this tax will make them more expensive by 10% -15% against their foreign counterparts (already 5% more expensive due to GST) and will shift business from them to overseas players. 
The refund money of travel agents & tour operators is also to be secured from possible default of airlines especially foreign airlines as well as any low-cost airlines. Advances/float accounts also to be refunded in full immediately as they are money for not issued tickets. For the period of this pandemic an executive ruling can also be made on preventing repatriation of Indian travel agents funds abroad by foreign airlines operating in India   Additionally the travel agent funds can be secured through an escrow account or by underwriting the same. 
Exemption from payment of insurance premium for the tourist transport vehicles for 12 months without any penal interest as they will have negligent travel business which will affect their viability.  It also enables permission to import of tourist vehicles under EPCG by tourism services exporters.
Create a global bidding fund for bidding for enabling Indian companies to bid for meetings, incentives, conferences & events. India needs to be positioned as the emerging mice destination in south & east Asia. 
Removal of the X visa requirement for mountain peaks to boost adventure travel.  Policy to be implemented for making the availability of sat phones for MOT registered adventure tour operators
MDA scheme guidelines to be revised with a progressive outlook, considering the changed market situation and the need to restart tourism promotions and increasing financial support to as high as 90% to recapture global markets.

GST law to be re-examined & amended to enable the following for tourism: 

  • IGST be allowed for hotels that will allow seamless credit across all travel agents and tour operators.  
  • The option of a reseller model for travel agents as they are distribution arms for airlines. 
  • Providing for a GST Set off of interstate Tourist transport taxes, taxes on parking fees & taxes on fuel
  • Option of charging GST at 12% with Input tax credits available to restaurants and delink them from room tariffs.
  • GST refund on purchases by foreign tourists can be implemented as already enacted under GST. – Tax Refund for Tourists (TRT) Scheme under section 15 of the IGST Act 2017. 

Step Six: Agenda for National Tourism Task Force
FAITH request you to take up a common agenda through the National Tourism Task Force with states. 
A complete waiver of the following for FY 2020-21 without any penalties at the level of state or local governments.

  • All fixed electricity and other utility charges
  • Excise duties,
  • Property taxes
  • Interstate tourist transport taxes
  • Any other local taxes

Renewal of all licenses, permits, permissions which were expiring in FY 2020-21 without any financial charges or penalties at the level of state governments.
Refund of cancellations from state government-owned institutions such as luxury trains & wildlife parks to refund all tour operators & travel agents without any cancellation charges.
Enable leveraging open spaces in metro cities such as terraces and adjacent areas for F&B to enable compliance with social distancing norms while also enhancing the eating out experience to stimulate the industry demand.
Create Harmonised standardised operating policies for tourism service providers across all states 
Create a tourism consumer demand promotion plan which is synchronised across all states and the Central Government and coordinated by the Ministry of Tourism
Immediate Industry status for tourism travel & hospitality across all states. 
Refund of unutilised GST credit lying with state governments to the tourism, travel & hospitality players to get immediate liquidity. 
For unorganised workers working with the tourism sector in the hinterlands (such as guides, porters, helpers, Sherpas, drivers) and who don’t have the safety net of PF / ESI, ensure coverage of sustenance wages and medical condition. Alternatively, it could be as a grant to support sustenance payments with ‘direct transfer’ to such affected tourism employees. 

FAITH has reiterated that tourism requires a very specific stimulus and special consideration. Tourism will be the last sector to start in full, only once the vaccine develops, the economy stabilises, full connectivity restores, the borders open (both interstate and international), and confidence of people returns. This situation is unique only to tourism. 
This is once in a generation crisis for tourism and thus our measures proposed too have to be exceptional for a recovery. For tourism demand to revive it is most critical to prevent the Indian tourism supply and jobs from collapsing immediately.

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