Budget 2021: Travel and hospitality industries express disappointment

After what had been its most challenging year, the hospitality industry had high hopes from Budget 2021. While there were no direct benefits announced, Finance Minister Nirmala Sitharaman provided indirect support to boost the travel and hospitality industries. 

The FM did not announce any specific relief to hotels and property owners.

However, “Strengthening of Urban Swachh Bharat Mission, modernising of existing health units at 32 airports, 15 seaports and land ports, proposed tax benefits for foreign aircraft lessors as domestic travel is expected to grow significantly in coming years,” Rajat Mahajan, Partner at Deloitte India said. 

Rohit Kapoor, CEO of Oyo India and South Asia, said, “It is heartening to see a Budget entirely focussed on revitalising the economy. On the backbone of the proposed reforms, we believe that a focus on growth-oriented measures, economic reforms, and inclusive growth would pave the way for extensive economic recovery. The government's focus on extending and improving transport (road, railway, metro) infrastructure with nearly 217 projects worth over Rs 1 lakh crore to be completed under National Infrastructure Pipeline will enable travellers to explore hidden gems, and therefore bolster the domestic tourism and hospitality industries. Additionally, keeping up with the changing times, an overall focus on technology with interventions like incentivising and promoting digital payments will fast track India’s transition into a digitally-enabled economy.”

He further added that with the series of interventions announced by the FM, India is on the path of stable and quick economic recovery.

“The funds allocated to COVID-19 vaccines will strengthen confidence among travellers and boost faster recovery in the service sectors. The government's efforts towards skilling the country's youth and collaborating with other countries will spur entrepreneurship and enable job creation as well. This budget truly has the potential for transforming India,” he said. 

Sanjyot Keer, Chef and Founder of Your Food Lab, seems to agree. He said, “The FM’s proposals for improving rail, road, ports, metro infrastructure, airports, and vista coaches in tourism routes will benefit the travel and tourism sector in the long-term.” 

Having said that, he adds that the Indian hospitality, travel, and tourism sector had great expectations from Budget 2021.

“There is no specific relief or proposals to boost the hospitality, travel, and tourism sector immediately in the Budget, which could have been a boost for the sector's revival. Immediate resource allocation or reforms could have been a big support for the sector. The government has not announced COVID-19 cess,” he added. 

Most experts and players in the hospitality sector do not seem to welcome the Union Budget announcements with open arms, and many say it has been a ‘disappointing’ Budget for the industry.

The hospitality industry accounts for almost 10 percent of the country’s GDP, employing nine percent of India’s working population, and “Yet it failed to find space in the Union Budget,” says Gurbaxish Singh Kohli, Vice President, Federation of Hotel and Restaurant Association of India (FHRAI). 

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Here’s what industry leaders had to say about the Union Budget: 

Shivanand Shetty, President, AHAR (Indian Hotel and Restaurant Association):

 “The Budget has failed to cheer up the restaurant industry, which is one of the most affected due to COVID-19 pandemic and subsequent lockdowns. After all the turmoil, we had our hopes pinned on the Budget and were expecting some positive measures like a stimulus package, rationalisation in GST, etc., but again we found no mention in FM’s speech. Such a critical sector contributing well to the GDP and generating employment opportunities cannot be ignored like this, especially when it is needed the most.” 

Gurbaxish Singh Kohli, Vice President, Federation of Hotel and Restaurant Association of India (FHRAI): 

“The hospitality industry has been bleeding, and the FHRAI has brought it to the government’s notice through several representations time and again. Our pre-Budget memorandum to the FM included some priority reforms to stabilise the industry such as:

• Review of the Kamath Committee recommendations
• Classifying hospitality under the RBI Infrastructure lending norm criteria
• Industry status to hotels, restaurants, and resorts across the country
• To include Hospitality and Tourism in the concurrent list
• MAT waiver for a period of three years
• IGST billing to hotels for corporate and MICE bookings.

The hospitality industry is disheartened and feels demotivated in its darkest hour. With zero foreign exchange earnings and less than 25 percent of pre-pandemic revenues, the sector is facing an existential crisis. The industry is the fall guy for the government. 

We stand by and come through for the government in its every need, as we did during this pandemic, but we are surprised that the sector could not find even a mention in the FM's budget. 

We wish our government would study what other countries have done to ensure tourism, the worst-hit sector, is kept alive. The hospitality and tourism industry was looking forward to some relief measures to lift this most severely affected industry by COVID-19. Instead, it has yet again completely and fully chosen to ignore us.”

Aloke Bajpai, Co-founder and CEO, ixigo:

“Tier-II and III cities have seen significant growth in demand for air travel and first time flyers post relaxation of lockdown norms. The monetisation of airports in these areas will help capitalise this growing demand by accelerating infrastructure development in underserved areas and strengthening regional air connectivity. 

While these infrastructure measures will boost tourism in the long run, it’s sad to see that no extra spends or tax incentives were announced to provide immediate relief to the severely affected travel and tourism sector." 

Tarun Gulati, Director, Himalayan Hotels and DJUBO Hotel Tech Suite:

"Tourism constitutes 10 percent ($275 billion) to India’s GDP. This is no small amount and we required a plan by the government and the industry to overcome the havoc caused by COVID-19 in this budget. The tourism industry employs 75 million people directly or indirectly. 

There were a lot of expectations from the government in the Union Budget. The tourism and hospitality sector has made several recommendations to the government to help it emerge from the impact of COVID-19 crisis. But the government failed to give importance."

Bala Sarda, Founder, Vahdam Teas:

“Rs 1,000 crore has been announced for tea workers of Assam and West Bengal. The details have not yet been shared but this is a positive step for the COVID impacted tea industry. Last year was a really difficult year for them and this is a timely intervention to provide much needed relief to the tea workers and will go a long way in easing the pain and hardships."

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Siddharth Goenka, MD, Octave Hotels and Founder, Aiosell Technologies:

"While we welcome progressive moves like faceless Income Tax Dispute Resolution and reduction of assessment time period, one of the biggest missing links has been special consideration for the hospitality industry post-COVID crisis...A temporary relief in both direct and indirect taxes for a few years could have provided the industry the boost it needs to recover from this unprecedented crisis. 

PC Musthafa, Co-Founder and CEO, iD Fresh Food:

"Given the current scenario, where the focus is on health, I was hoping to see some announcement around the organic food segment in India."

Farman Beig, Founder and CEO of Wat-a-Burger:

“Budget 2021 has provided little support in terms of tax holiday. However, benefits like easy loans at better interest rates with simpler procedures could make it a lot easier. Input tax credit was expected to be brought back in the restaurant system. Without which we are paying more than GST to the government and we end up increasing our operations cost by 15 percent.” 

Sahil Arora, Founder, Smart Chef (Mr Pao, Dosama and Dimbao) :

"As food and beverage business owners, we pay a decent amount for commission and then on top of that we pay 18 percent taxes for which there is no rebate. It is an added expense in a business which anyway yields very little profits after commission and discounts. Though there were no announcements made in the Budget, hope we get to know later in the day through a press release." 

Kausshal Dugarr, Founder and CEO, Teabox.com:

“Last year, due to the pandemic, production of Indian tea was behind its global counterparts but the price realisation was better as compared to any other years. The average price of tea increased by almost 30 percent as compared to the fiscal year 2019-20. This has in a way, set the base for the Indian tea industry for this year, as the increase in price gives a positive outlook.  

Allocating Rs 1,000 crores for Assam and West Bengal tea industry at this point is a welcome move, which will boost the Indian tea industry for the coming years. The scheme for tea farmers declared in the Budget for the welfare of children and women is a necessity at this point of time, more than ever and will help in improving things on the ground level and we're hoping this is executed in the best possible way.”

Abhinav Jindal, CEO and Founder, Kimaya Himalayan Beverages:

“There were a few missing initiatives in the Union Budget 2021 that we, as an industry, were expecting and could have helped in a longer run:

• The longstanding demand for an input tax credit for various partners in the F&B industry that are into the five percent GST regime and do not get any input tax credit on their billings/purchases. 
• We also expected some sort of support in terms of subsidy schemes, which could have helped business owners in the F&B Industry to overcome the huge financial expenditure that they had to incur staying afloat during the pandemic. These businesses were shut for the most part of the year yet still had to bear logistics such as salaries, rentals, utility bills. Some financial support could have helped them tide over these finances and invest to start afresh into their outlets. This could have also brought new hope for the owners who had to shut their outlets during the lockdown.
• We still expect the government to extend support with newer ways to help the industry propagate and aware the general public, domestic and foreign tourists of the certain outlets and products in each city through various government travel portals, so as when people travel, they can try them. This could drive traffic and in turn, increase sales. 
• Also, through various training and management institutes, the government can help these outlets to train and upgrade to newer standards to enhance the consumer experience.

This could have gone a long way in enduring Atmanirbhar Bharat and the government is there to support them in their hour of need.” 

Rachel Goenka, CEO and Founder, The Chocolate Spoon Company:

"The Budget is extremely disappointing as yet again the hospitality industry has been left out...At the very least we expected some support towards regenerating employment. Given the severity of the impact of the pandemic on the hospitality sector, we were hoping for impactful, immediate and near-term support. We were equally disappointed with the continued denial of input tax credit, which is critical for survival."

For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com.