FTAs during the period January-December, 2016 were 88.90 lakh with a growth of 10.7 per cent as compared to the FTAs of 80.27 lakh in January-December 2015. FEEs from tourism in rupee terms during January-December 2016 was Rs. 1,55,650 crore with a growth of 15.1 per cent. December 2016 registered a 13.6 per cent growth in Foreign Tourist Arrivals (FTAs) over the same period in 2015 with 10.37 lakh arrivals. FEEs was Rs.16,805 crore as compared to Rs. 14,152 crore in December, 2015 with 18.7 per cent growth rate. USA (18.33%) occupied highest percentage share in FTAs followed by Bangladesh (13.02%), UK (11.71%), Australia (5.43%), Russian Fed (4.18%),Canada (4.13%), Malaysia (3.38%), Germany (2.80%),  China (2.53%), Sri Lanka (2.25%), Singapore (2.12%), France (2.01%), Japan (1.79%), Afghanistan (1.38%) and Nepal (1.34%).

Brijesh Modi, Head-Finance & Commercial, SOTC Travel, says, “Due to the changes in the taxable services from 30 per cent to 60 per cent on holiday packages (bundled services), the effective service tax rate will see an increase from 4.5 per cent to nine per cent.” He adds that the tax on hotel accommodation services provided by travel agents is expected to increase from the current 1.5 per cent but agents are still seeking clarification on the same. “On transport services provided by travel agents, the current service tax rate will remain at six per cent. Above change in service tax will increase the selling prices of holiday packages,” Modi says.

Seychelles continued to impress Indian tourists, recording a 42 per cent annual increase in tourist arrivals from India in 2016 compared to 2015. Around 11,000 tourists from India visited Seychelles in 2016 compared to around 8,000 in 2015 and as a result India broke into the list of top 10 source markets for the tourism board. This increase can be attributed to the India tourist office’s committed focus on promotion of the destination, interest and efforts from the hotels and DMCs to capture the Indian market, increased customer awareness due to Bollywood associations and innovative digital presence along with an increase in Air Seychelles daily flights from four to five times a week. Sherin Francis, CEO, Seychelles Tourism Board said, “We are thrilled with the interest created in the market about Seychelles that made it possible for the momentum of success to continue. We have seen a phenomenal increase in arrivals since we opened office three years ago. The increase in arrivals from India was 42 per cent making Seychelles one of the top choices for a holiday. This would not have been possible without the constant support of Air Seychelles, the DMCs and the hotels who walk with us hand in hand in going the extra mile to ensure year on year success. It is this passion due to which we have been able to position Seychelles as a destination which is meant for all- families, couples, small groups, celebrations and MICE.”

Jay Bhatia, Hon. National Treasurer, Travel Agents Association of India, says, that although the effective rate of tax for a tour operator has increased, the government has removed restrictions on claiming CENVAT credit of the input services. “Now the input credit for all eligible services can be claimed. However, the hotels don’t give a break cost and the competition faced from OTAs still shall persist as regards to a tour operator. The Government is losing a lot of service tax as well as the loss in terms of foreign exchange going out when travellers book through the OTAs. The Indian tour operators have lost all ground to compete with the global OTAs who are promoting and selling online.”

Sarab Jit Singh, Vice Chairman, FAITH, says, “While the service tax would increase to 60 per cent, the government has allowed input credit, which might neutralise the effect of service tax. However, I feel that inbound tourism might not be affected much because of this rule. In fact, there might be some benefit for inbound tour operators in the long run. It will be outbound tour operators, which will see the impact of this announcement. I feel that this ruling is part of government’s move towards GST. Such measures would force people to do business legitimately.

While this ruling will affect tour operators’ business, there is still confusion over if the increase on service tax would be 6 per cent or 9 per cent. P.P. Khanna, President, ADTOI, says, “We have called a meeting on the same. I feel that with this announcement, the government is preparing us for the GST. There is already a big load on tour operators, as we are competing with OTAs. We know that tour operators come to be a bit costlier because they are already paying service tax, which is not the case with OTAs. Now, with the new tax regime, it would be another blow to our businesses. We only survive on relationships we build up with our customers and their loyalty. However, with more price hikes, we would sure lose out on our business. On one hand, the government wants to increase the employment and revenue in tourism, on the other hand, it is heavily taxing the tour operators.”

Rajan Sehgal, Chairman – Northern Region, TAAI; Director, Arrivals Air Services, opines that post-demonetisation, the travel industry has already lost out on a lot of business with inbound and domestic tourism witnessing a decline. He says, “The times have already become tough for the industry and with the announcement of the tax on tour packages, things are only going to get worse. This is probably the only industry with no structured income and often, non-IATA agents or agents who have not been recognised by the Ministry of Tourism are earning more than the verified ones. Such decisions are discouraging more agents to get recognised by the tourism bodies since they are getting more returns without it. Here we discuss about how taxes need to be lowered to boost tourism but it looks like the opposite is happening.”

Riaz Munshi, Managing Director, N. Chirag Travels and Vice President, OTOAI, says it is a negative and an unfortunate move for the tourism and hospitality industry. “The increase in service tax is almost nine per cent more and a deterrent to our business as it reduces the competitiveness of our packages. The government has to understand that the products sold are available globally and an Indian traveller might as well buy a package for Singapore from a travel agency based in Singapore rather than pay 9 per cent extra tax to an Indian travel agency. The travel agencies based abroad do not need to pay this service tax and thus can sell packages at a much cheaper rate than us. We as OTOAI will put forward our concerns to the government and highlight how this move is a dampener to the growth of our tourism industry.

Ankush Nijhawan, MD, Nijhawan Group, “I think this increase in service tax is just the trailer for GST to set in. The government has made a soft opening to what GST will have in store at 14-18 per cent. Given this move, the tourism and hospitality industry has to brace itself for high tax rate when GST will be implemented. The prices will shoot up in short term and the effect will be seen on outbound as well as domestic travel. The increase in prices of holidays sold as packages will result in travellers to pay more and the business will be impacted temporarily. However, we need to wait for what GST has in store when it is implemented in June this year.

Guldeep Singh Sahni, President, OTOAI, says “With this move, the tax for us is going to increase from 4.5 per cent to almost 9 per cent. The move will directly affect the offline tour operators within India and it will in turn be beneficial for those who take booking outside the country, as they won’t come under any such laws. Over 20 million people from India are travelling outside the country and the outbound travel industry is creating so many jobs. Taxing this sector would only affect the tour operator businesses in India and would allow anybody to operate the same business for Indians outside India. It’s an unjust tax and would kill the tourism industry in India.”