October 23, 2020 TnH Global

Release SEIS urgently to save tourism

It is imperative that the government release the pending dues of tour operators under the Service Export from India Scheme (SEIS) as the first step to stimulate recovery in the tourism sector and save millions of jobs.

Words by Prem Kumar

In the backdrop of the COVID-19 crisis, India’s inbound tour operators are desperately seeking the release of their incentive amounting to hundreds of crores, under the SEIS for the last fiscal year. Their dues under the SEIS are pending for months at a time when these tour operators are facing a severe liquidity crisis. They are also demanding that the scheme should be extended for the current fiscal, and thereafter and that the SEIS-incentive should be increased to 10%.

While the number of tour operators eligible for claiming the benefits under the SEIS is not huge, these hundreds of inbound tour operators play a key role in promoting India as a tourist destination. They employ thousands of people and help create millions of jobs all over the country. Their actions at home and abroad have ramification for the country’s whole tourism industry, therefore, their financial health matters for everyone, more so for the government.

Existential Crisis

Reeling under the colossal blow of the pandemic, at least 30% of India’s inbound tour operators may shut their shops permanently; according to some estimates, this figure could be as much as 60 to 70%. If this happens, it will be a big jolt not only to India Tourism, its years of efforts but also to the country’s economy, which may lose as much as 70 to 80% of its foreign exchange earnings through tourism. The last year country earned about US$ 30 billion through tourism.

It is no revelation that the tourism sector worldwide is facing a tough time, but the plight of India’s tourism industry is much worse off. Unlike its counterparts abroad, India’s travel & tourism industry has got no relief from the Government of India that could have served as succour for the industry.

The industry is facing one of its biggest existential crises, which is aggravated by the fact the government’s much-touted Atma Nirbhar Bharat package worth Rs. 20 lakh crore offered little for the tourism industry. It had made many representations to the Government, but all went unheeded.

As if that wasn’t enough, the government is dragging its feet on its stated commitment towards the industry under the SEIS for the year 2019-20; making no move to clear the industry’s pending dues under the scheme for the last fiscal. During this challenging time, timely disposal of their incentive claims would have provided much-needed succour to them and helped them restart their businesses and save millions of jobs.

Contrary to the expectation, there is no clarity on SEIS for the tourism industry. With their back to the wall, tour operators are feverishly appealing the government to release pending SEIS dues for last fiscal.

Elaborating on this issue, SARAB JIT SINGH, Managing Director of Travelite (India), who was instrumental in securing benefits for inbound tour operators, under the SEIS, said, “The current status of this scheme for the tourism sector is that it had ended last year but was extended for the FY 2019-2020. However, the government is yet to issue notification as to what would be the SEIS rate for tour operators for the last fiscal, and when windows to claim this incentive will open.” The government usually disposes of these claims by August.

Help Save Tourism

“We explained to the government that the tourism industry is in shambles due to the COVID-19 crisis. Tour operators’ sources of revenues are completely choked. They don’t have money to pay to their employees or run their offices; many of them have closed their businesses,” said Singh, a tourism industry veteran, who had served as senior vice president of Indian Association of Tour Operators (IATO) and Vice President of FAITH.

According to Singh, in order to revive the country’s tourism sector, tour operators immediately need to restart their businesses and marketing activities, but they are unable to do so because of their abysmal financial health.

Underlining the importance of SEIS for tour operators, Singh said, “If incentive under the scheme is paid, it will bring some crucial relief to tour operators, who then can restart their business and marketing activities. The early resumption of their activities will help the tourism sector get ready to receive foreign tourists, as soon as COVID-19 subsides. In this way, the tourism sector can bounce back and millions of jobs could be saved.” However, if no relief is extended then, Singh warned, the financial implication of the pandemic for tour operators is so severe that 25% to 30 % of them may become bankrupt and will never be able to reopen their businesses; that would hit not only the sector’s immediate revival prospect but also its long-term growth.

SEIS@10%

Tour operators are also demanding that SEIS should be extended beyond the last fiscal year for tourism and the SEIS-rate for them should be increased from the earlier 7% to 10 % for 2019-20, and for years thereafter. 7% is too little incentive for them as they pay GST as much as 23%. “When we got 7% incentive, we transferred it to our international customers by reducing the price,” said Singh, adding that if the Indian inbound has performed marginally well in recent years, it is because of this scheme which in effect is a partial tax refund scheme. According to Singh, if operators get 3% additional incentive for FY 2019-20, they will have some additional money for overseas marketing. “That is why we are demanding that it should be increased to 10% for the last fiscal.” Singh is also demanding that the scheme, with the increased incentive, should be extended to the current fiscal and the fiscals thereafter.

The Biggest Marketeers

Tour operators play a crucial role in promoting India as a destination in overseas markets, sharing the marketing responsibility of the national and state governments. Operators go abroad, participate in trade fairs and meet people in order to promote India. “It is because of their marketing activities that most of the foreign tourists come to India. They promote not only their products, but the whole destination, and the whole tourism industry and governments benefit from their efforts,” Singh asserted, adding that although tour operators do the marketing, many tourists visit India without availing their services, and in that case, the government retains all taxes because it does not have to pay any incentive to tour operators or tourists.

Emphasising that keeping engaged with source markets and trade partners through marketing activities are essential to receive tourists in the future, Singh said that if tour operators do not start their overseas marketing very soon; post-COVID-19, other destinations will capture India’s markets. Therefore, the sooner tour operators start businesses, marketing activities; the better it would be for the tourism industry, for people employed in this sector, and for the national economy. For this to happen, reviving financial health of tour operators is crucial.

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