With Indians reaching for their passport and heading to new international holiday destinations ever so often travel companies are urging the government to review taxes applicable to air travel in the forthcoming Budget.
“The government should look at enhancing the tax relief on Leave Travel Allowance (LTA). Some companies have a ceiling of ₹25,000. There is also an urgent need for the government to extend tax relief to international travel,” said Manish Gujaral of travel agency, Gujaral & Associates.
As of now, tax relief on international travel cannot be claimed in the LTA. Underscoring this, Sharat Dhall, president of travel site
Rajesh Magow, CEO and Co-Founder of MakeMyTrip.com, a travel planning site, said that the Budget needed to be growth-oriented, and the government should avoid "what effectively amounts to double taxation in the sector.''
To promote the tourism industry, Magow said the government needed to follow through on its move for 100 per cent foreign direct investment (FDI) in airlines. "Cost of operation is very high for airlines and the government should help by reducing fuel surcharge and rationalising airport charges.
To promote the tourism industry, Magow said the Government needed to follow through on its move for 100 per cent foreign direct investment (FDI) in airlines.
Domestic lure
Though more Indians are travelling abroad with international destination searches recording a jump by 101 per cent as compared to last year, inland tourism has also become more adventurous. For instance, Bhutan, at the eastern end of the Himalayas, has witnessed a staggering 244 per cent increase in overall searches, according to a survey by global travel search site Skyscanner.
Domestic destination searches too have risen 60 per cent between January to April 2014, as compared to the same period last year, the survey showed.
“Indians have become more experimental when it comes to travel. In the spirit of exploration, they are looking for longer, more expensive trips and are searching for newer destinations,” said Kavitha Gnanamurthy, Senior Marketing Manager, Skyscanner India.
Domestic tourismYatra.com ’s Dhall added that the lure of travelling overseas could be converted to domestic tourism, “There is an urgent need to develop smaller tourist destinations. We need to have airports in those places. We have the biggest coastline as compared to any other country, and there are several beaches here that are untapped.”
He added that China and Thailand had managed to set up newer destination in smaller places and lure domestic as well as foreign tourists.
Travel trouble Speaking about aircraft maintenance that is heavily taxed in India, he said, “Growth of the air passenger market is a catalyst for overall economic growth in various places. All airlines are struggling to manage their cost structures. ”
Though the maintenance, repair and overhaul (MRO) sector in India is estimated at $700 million, only 5-10 percent of the business is carried out within the country. Indian carriers prefer to get their fleets serviced in Colombo, Singapore, Malaysia and Dubai, due to the prevalent tax structure in the country that make MRO operations up to 50 percent costlier. MRO companies have to pay taxes to the extent of 40 per cent for providing services in India.
Downward trend Stating that the price of air travel has gone up by 20 per cent in the last three years, which has driven down the growth in the market, Dhall added: “Tourism in India grew by strong double digits for seven years. However, for the last three years, it has been flat. Just 60 million passengers have travelled by air in the whole year, because of the high ticket prices.”
He added that the Government needed to invest in infrastructure, which would drive tourism in the country, and is “bound to have a multiplier effect, whereby hotels could open up, taxi operators could multiply, restaurants could boom, and tourists could indulge in shopping, which would help the economy.”