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General
FAITH Flash Analysis - Union Budget 2017-18

Announcements in Speech

1. Announcement: Public Endorsement of Tourism as a sector of economic importance with high employment potential & economic multiplier effect:

- Impact : positive

- Duration: Immediate

- Impact type: A Powerful motivator to most state governments which will enable them to impart higher importance to tourism while formulating their state budgets. Shows that the thinking in ministry of finance is hopefully changing & they are beginning to treating tourism as a serious sector which can drive economic growth

- A Faith recommendation

 2. Announcement: 5 National special tourism zones to be developed in partnership with state governments, on SPV basis

Impact : positive

Duration: Medium - long term 

Impact type: Creation of new supply sources of tourism for radical growth

- A Faith recommendation

3. Announcement: Incredible India branding to increase

Impact : positive

Duration: Short - long term 

Impact type: Will enable the refreshing & resurgence of the Incredible India brand

- A Faith recommendation

 4. Announcement: Listing of IRCTC

Impact : positive

Duration: medium - long term 

Impact type: Creation of a new tourism asset class in financial markets

5.  Announcement: Pilgrimage & Tourist trains

Impact : positive

Duration: As & when

Impact type: More domestic Tourism & more premium inbound tourism for tourist trains

6. Announcement: Defence personnel train ticketing service charge free

Impact : positive

Duration: Immediate

Impact type: creation of a new domestic tourism segment in defence segment

7. Announcement: Operationalisation of Tier 2 airports

Impact : positive

Duration: As & when

Impact type: creation of a additional domestic tourists from tier 2 cities connecting  to main cities through  a hub & spoke model

- A Faith recommendation

8. Budget Annexures ( in supporting documents but not in the announcement)

Annexure  Release: Domestic tourism branding budget increase to Rs. 110 crores over Fy 16-17 (Rs. 75 crores)

Impact : positive

Duration: Immediate

Impact type: Create more domestic tourists

- A Faith recommendation

9. Annexure Release: Tourism budget increase to Rs. 1840 crs over Rs. 1670 crs in 16-17

Impact : positive

Duration: Immediate

Impact type: Create more support to tourism ministry 

 Disappointments & Concerns in Budget Speech

 

Disappointment: Service tax increase on tour operators on outbound not rolled back & on domestic not deferred till GST

Impact : negative 

Duration: Immediate

Impact type: outbound tour operators industry will get very price uncompetitive & domestic tour operators will go through procedural issues of input tax collection 

 Concern: Outbound tourism of 2 crores  & purchase of cars mentioned in the same context of tax non compliance prior to demonetisation

Impact : negative 

Duration: ongoing 

Impact type: The general perception of tourism can get impacted when it is believed that rather than reporting taxes, citizens spend on cars purchase & international travel

 Disappointment : Infrastructure status to hotels

Impact : negative 

Duration: ongoing 

Impact type: Hotels were not allotted infrastructure status

 Overall, in the immediate term, there will be a negative impact due to service tax increase on outbound tour operators & procedural bottlenecks to domestic tour operators. In the long run, if the 5 mega zones get developed it will create large scale new tourism supply stimulating the complete market. The enhanced spending on domestic & international markets should stimulate additional traffic.

It is also very heartening that publicly in front of the whole parliament & the whole nation, the finance minister, in the union budget,  has endorsed tourism as an important macro economic activity with big employment generation & economic multiplier impact. This is the beginning of hopefully a change from the conventional government thinking of treating tourism as an elitist activity. - We must highlight this to all state government officials & to those from other ministries whenever we meet them.

This is a quick analysis of the stated & published announcements. This is not a tax opinion & all are advised to take a detailed interpretation from their tax lawyers for the fine print which would be applicable to their businesses.

 



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