IATO’s Pre-Budget Memorandum

In a recent development, the Indian Association of Tour Operators (IATO) presented their Budget proposal for the Union Budget 2005-06 to the Ministry of Tourism, government of India. The following are the suggestions :-

ABOLITION OF SERVICE TAX

Service tax on foreign exchange being earned by the tour operators has been exempted by the government, which has helped the tourism industry to compete with other neighbouring destinations to some extent. IATO recommends that service tax should be fully abolished on the tourism industry.

DOMESTIC AIRFARES - TAXES ON ATF

ATF prices be further reduced by bringing down the custom duty. IATO also recommends that ATF should be declared as "Declared Goods" by the central government so that a uniform four per cent sales tax on ATF is levied by all states, which would help in bringing down airfares and make tourist packages more competitive.

REVIVAL OF SECTION 80 HHD OF INCOME TAX ACT 1961

Benefits under section 80HHD on foreign exchange earning by the tourism industry have been withdrawn. IATO strongly recommends, that this concession should be revived in the original form in the ensuing union budget.

BRING TOURISM IN THE PRIORITY LIST

Tourism be brought in the priority list and tourism sector be allotted atleast Rs 1000 crore in the plan outlay of the ensuing union budget.

ABOLITION OF DUAL TARIFF

IATO has always been advocating for it's withdrawal.

RATIONALISATION OF TAXES

There is an urgent need for uniform tax structure to enable the Indian tourism industry to compete in the world market. IATO strongly suggest that a cap of combined tax of 10 per cent be levied on foreign tourists. All taxation problems can be solved, if tourism is placed in the concurrent list.

SHORTAGE OF HOTEL ROOMS

There is an urgent need to multiply tourism infrastructure. We need more hotel rooms especially in the category of budget class i.e. four star and below.

AIR, RAIL AND ROAD CONNECTIVITY

We need more international airports, atleast one in each state. This will avoid congestion in metro cities. There is an urgent need of many more domestic airports for better connectivity. Improving the quality of roads and railways is needed. The Naresh Chandra committee report on civil aviation should also be implemented in totality and not selectively.

RATIONALISATION OF STATE TRANSPORT TAXES

There is an urgent need of rationalisation of the taxation on transport by different state governments. Uniform taxes need to be adopted and transport tax should not be considered separate subject. Road tax should not be on the number of seats in the bus but the actual number of passengers in the bus. This would ensure augmentation of tourist buses in the shortest possible time.

MISCELLANEOUS

A. It should be made mandatory for all state government to give one year's advance notice before they levy any new tax or enhance any present taxes, which has direct bearing on the tourism industry.

B. Any tax, which is levied on the tourism industry (considered to be deemed exports) should be adjusted against the taxes to be paid by the tour operator. (Same system as was proposed in case of the service tax.). This way we would not be exporting our taxes and it will also have the following additional benefits:

(i) Destination India would become competitive compared to other competing destinations in the South East Asia.

(ii) It would act as a catalyst for the foreign tourists to book their holidays through an agent. More operators would come into the market. (employment generation).

(iii) It would also ensure more turnover from each tourist coming to India as each and every tour operator would try to maximise the package revenue.

(iv) Quality of transport would become international.

The pre-Budget Memorandum was presented by Subhash Goyal, president IATO, and Major Murli Dhar, senior vice president, IATO.