PremiumThe Indian travel and tourism industry was among the worst hit during 2020-2021 due to the pandemic. While there has been a gradual recovery in the domestic leisure travel segment since mid-2022, long-haul international travel has been lagging.
NEW DELHI: There is a need to overhaul taxation and compliance structure to boost the domestic travel industry, co-founder and group CEO, MakeMyTrip Rajesh Magow told Mint.
“The current taxes and compliance structure have created an imbalance as they affect online travel agencies (OTAs) located and operating a permanent establishment in India. We urge the government to review the differential regulation as this gives unfair advantage to foreign based entities thereby impacting India-based companies as well as leads to a loss of tax revenue for the government," Magow said.
“For instance, a direct tax provision mandates the collection of 5% TCS (tax collection at source) with PAN (permanent account number) and 10% TCS without PAN from the customer of an overseas travel package from any online e-commerce entity. This allows foreign-based OTAs to offer lower costs to Indian citizens because of the non-applicability of GST (Goods and Services tax) or direct taxes. No KYC (know your customer) process by foreign entities adds to the attraction for a section of Indian travellers," he added.
The Indian travel and tourism industry was among the worst hit during 2020-2021 due to the pandemic. While there has been a gradual recovery in the domestic leisure travel segment since mid-2022, long-haul international travel has been lagging.
Foreign exchange earnings through tourism for 2021 stood at ₹65,070 crore, in 2020 at ₹50,136 crore, in 2019 at ₹2.1 lakh crore, and in 2018 at ₹1.9 lakh crore.
Magow also sought a level playing field for offline and online bookings for bus and hotel bookings. There are also concerns among the industry players over disparity between offline and online bookings.
“Currently, the customer pays a 5% GST (Goods and Services Tax) charge when booking a non-AC bus through an online platform. This charge is zero for an offline booking. The disparity is similar in the case of an online booking of unregistered hotels and homestays," he said, adding that the requirement for an OTA to register in all states/UTs should be reconsidered as this means having 36 offices, GST registrations, and tax-collection-at-source (TCS) to offer services across India.
Magow also reiterated that the government should review long-standing demand of infrastructure status for industry as this will help in easier access to institutional credit.
“We suggest that tourism exports be treated at par with other exports and services and such transactions may be zero rated for GST without stopping the flow of input credits," he added.