Tour operators urge tax rollback as inbound tourism struggles

New Delhi: The Indian Association of Tour Operators (IATO) has requested the Centre to reinstate duty credit via the Service Export Incentive Scheme or introduce an alternative in the new Foreign Trade Policy, as inbound tourism remains sluggish.

IATO has also urged for a rollback of the 5-20% tax collected at source (TCS) on overseas tour packages announced in the Union Budget, effective July 2023, although the tax can be claimed back by the package buyer at year-end.

In a letter to the government, Rajiv Mehra, president, IATO, said the tourism industry was severely affected by the pandemic, with only 30-40% of inbound tourism to India having returned since international flights and tourist visas were revived. He said that the government’s support was crucial for the recovery of the sector.

Implementing these measures would help Indian tourism compete with foreign tour operators and neighbouring countries that could potentially sell holiday packages to Indians without the tax applying to their firms.

Mehra said that it took nine years for India to increase foreign exchange earnings to $30.05 billion in 2019 from $14.49 billion in 2010, but earnings have now fallen back to 2004 levels at $6.17 billion. He also highlighted the challenges of competing with other countries due to high GST rates, the withdrawal of marketing and promotion activities in foreign countries, and the lack of alternative benefits.

The planned TCS increase from 5% to 20% in July will negatively impact Indian tour operators, as travellers could bypass them and book outside the country, causing losses for both the government and operators. IATO suggests bringing the TCS back to 5% or lower.

India’s budget for overseas promotion activities like Incredible India has been reduced by more than half this year to ₹167 crore, down from ₹525 crore two years ago, yet the government aims to attract 25 million tourists by 2030.