Budget 2024 Expectations: Streamlining TCS to GST credit —here’s what travel & tourism sector expects this year
Finance Minister Nirmala Sitharaman will unveil the Interim Budget for the financial year 2024-2025 (FY25) on February 1, 2024, which is likely to keep the focus on fiscal consolidation and nominal economic growth projection and may not involve any major policy changes.
Sitharaman’s declaration that it will be a vote of account suggests that no significant policy announcements are likely expected in this interim budget. With the announcement of the election dates around mid-March, the model code of conduct (MCC) is expected to come into effect barring the government from announcing any policy decisions.
As a a Vote on Account is merely an interim authorisation to spend money, as opposed to a full Budget that includes details of expenditures and receipts, including tax changes and government policies, this time significant tax and policy changes are unlikely.
The upcoming pre-election interim budget occurs at a juncture when the overall economic landscape appears stable, which is underpinned by the easing of financial conditions, and robust macroeconomic data, according to analysts.
“The current budgeting exercise is also confronted by economic headwinds such as the deceleration in the global economy, pressures in the agriculture sector, and strains on the rural economy,” experts said.
Coming to sector-specific changes, the travel and tourism sector represents a vital economic driver, according to industry experts. With a 5.8 per cent contribution to India’s gross domestic product (GDP) (in 2022) and the government’s target of achieving $1 trillion by 2047, the sector forms a strong force multiplier – across allied sectors, employment generation and foreign exchange receipts.
According to a recent report, the tourism sector is projected to contribute $250 billion to the country’s GDP by 2030, generating employment for 137 million individuals. In this regard, here’s what leading experts from the travel and tourism expect from the upcoming Interim Budget 2024 to transform India into a destination of choice:
1. Streamlining TCS, tax reduction
One of the expert said, “Reduced income tax levels to provide increased disposable income in the hands of the people which create a boost for travel & tourism spends.” Menon also expects leave travel allowance (LTA) exemption annually, against twice in four years to catalyse domestic tourism.
Experts also said that the standardisation of tax collected at source (TCS) at five per cent on foreign travel packages should be done, against the current five per cent and 20 per cent slabs).
“Coalesce the TCS rate on outbound tours into a single five per cent slab to reduce the significant advantage enjoyed by international competitors (exempt from this levy),” another expert said. The government should also provide clarity with respect to TCS on forex card payments, said experts.
2. GST input credit
Travel and tourism experts also believe that the goods and services tax (GST) input credit facility should begin for inbound and domestic tourism. “Centralise similar issues faced by a single assessee in multiple states – reducing unwarranted time, efforts and litigations in multiple jurisdictions,” another industry expert said. The compliance mechanism in filing reports and reconciliations, audits process must also be simplified, he added.
3. Removal of TDS
“Remove the deterrent to technology – in the form of the current tax deducted at source (TDS) that is levied on automated bookings (self-booking tools) for internal/closed user groups such as our business travel platforms. This would align with the government’s commitment to ease of doing business and digital adoption, and the larger objective of building a Digital India,” industry expert said.
Apart from the above expectations from Interim Budget 2024, the travel and tourism industry also identifies certain themes that should be of prime focus for the government, in order to strengthen India’s tourism:
– Infrastructural Focus: As a key fundamental for the sector, setting up of new airports through private participation must become a priority, said experts. Creating a viable hub and spoke model and rapid expansion in rail, road and waterways (sea and river cruises) must also be prioritized. Additionally, infrastructure development for high growth areas like religious circuits and underleveraged hidden gems (Lakshadweep) must be looked at, according to an expert.
– Inbound Tourism: The government should focus on the revival of the Inbound incentive scheme – but for select destinations, according to industry experts. Inbound tourism inbound tourism means visits to a country by visitors who are not residents of that country. Inbound tourism is often seasonal, meaning that many destinations will have evident peak, shoulder and low seasons. This is often dependant on weather conditions and public holidays.
“We are confident of the government’s continued focus on expediting infra development, especially extension of its Udan Yojana and Vande Bharat routes that ensures regional access and affordability. Connectivity to remote but viable tourism areas creates vibrant new circuits plus meaningful employment that uplifts the entire eco-system. Incentives that promote sustainable travel and tourism is now a critical ask as we endeavour to preserve our planet for future generations,” expert added.
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