Union Budget 2022: Hospitality sector expects tax relief, policy reforms and developed infrastructure

It is no secret that the COVID-19 pandemic has drastically hit the hospitality sector. In the span of two years, the hospitality sector has been able to survive only through domestic tourism – where we saw the rising trend of staycations, budget travel, and private villa stays. These changing travel trends were the only things keeping the tourism industry alive. Any relief that came from the government was in the form of loan repayment extensions and separate state government initiatives that provided some nominal tax relief. However, if we want the industry to thrive again instead of just surviving, we expect a lot of active initiation and implementation from the government. And we hope that the upcoming Union Budget led by Finance Minister Nirmala Sitharaman on February 1, 2022, will lay the foundation for that. These are a few expectations of mine from the Union Budget discussions 2022.

Tax relief

The first area we need support in is taxes. I really believe that GST has not been kind to our sector, especially in the last two years. Let me explain with room tariffs. When someone checks into a hotel, they might have to pay anywhere between 12 per cent and 28 per cent towards GST for each day of their stay.

Paying that much to the government was even possible pre-COVID. But now, when the industry as a whole is scraping by in terms of profits and revenue, it is a challenge. Quoting Royal Orchid’s CFO Amit Jaiswal – “we need GST rates to drop to 5 per cent” if we want to give some concrete relief to the industry. And I really hope we get this relief in the upcoming budget.

The high GST rates alone are responsible for a decrease in inbound tourism. Our tax regime is a bit stricter and higher than our neighbouring tourist-friendly countries like Malaysia, Singapore, and Thailand. Cutting GST rates will increase inbound tourism and actually make travellers want to visit our country more than ever.

Priority sector

Even though the hospitality sector contributes around 9.5 per cent towards India’s GDP, it does not receive the protection and support it deserves. We are still perceived as a non-essential industry. If we received our rightful appreciation, we would multiply whatever we received multi-fold – and in turn, India’s economy would stand to benefit.

Recently, the Hotel Association of India appealed to the central government to recognize it as part of the infrastructure sector. If the government and finance ministry do this, we would be able to see a rise in investments and infrastructural projects. And the plea is not abstract – the hotel association has actually come up with easily implantable solutions and policy reform suggestions. The government spends so much on beautification infrastructural projects. So, allocating more funds towards hospitality infrastructure would boost tourism. At its core, the plea is to ensure that we find our footing again.

A mindset shift

A core problem is that the hospitality sector is still considered non-essential. Yes, people’s lives and jobs were absolutely vital in the pandemic. I’m not denying that. But we have to realize that mental health and physical health is important too, and exploring nature, unwinding, and spending time with loved ones is an essential part of our biology. These habits trail back to ancestral times.

When the government realizes that travel and tourism is not a luxury but intrinsic to human nature when there is a mindset shift in how it perceives hospitality – I believe they will be more helpful towards us. For instance, simply delaying loan repayments was not enough. It was just a temporary breather, and what we need is something more permanent yet adaptable to any unforeseen eventualities. Given how the consumer is the backbone of the hospitality industry and how the common (wo)man lost so much, the government ultimately needs to find ways to protect them too.

The end note

While the budget for 2022 might be promising in terms of documental reforms, what we ultimately need is for those paper-scribbled promises to turn into reality. We need logic, good intentions, and a whole lot of structured implementation. Just talking about it won’t do. The sooner we realize it, the better.

The author is the CEO & Founder of Hireavilla. Views expressed are personal

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