The tourism and hospitality industry has been among the sectors worst hit by the pandemic due to high fixed costs and next to zero revenues. To cover some of these losses, the industry has requested the government to release the benefits under SEIS (Service Exports from India Scheme), which notably, was discontinued in 2020.
SEIS was introduced in Foreign Trade Policy (2015-20) to incentivise services export. Under this scheme, the selected services were entitled to a 3 to 7 percent incentive on net foreign exchange earned in the form of duty credit scrips.
Services Exporters have been waiting for the release of notification for 2019-20 to enable them to submit applications for the incentives on exports undertaken in the previous year.
A petition was filed in the Kerala High Court by tour operators seeking relief from the government to release the pending SEIS incentives to the travel stakeholders. On this, the Kerala High Court has given an interim direction to the Ministry of Commerce and Industry to make the online application process available to hotels to claim the benefits of SEIS.
"The release of SEIS could help the hospitality sector survive and revive their businesses in the absence of soft loans that financial institutes earlier offered," said EM Najeeb, Senior Vice President, Indian Association of Tour Operators.
As per RBI data, SEIS helped the tourism and hospitality industry exports to grow at a compound annual growth rate (CAGR) of 7.9 percent between 2015 and 2019.
According to Maneck Davar, Chairman, Services Export Promotion Council (SEPC), no official reasons cited were cited for the postponement or discontinuity of the scheme nor any official word so far on the issuance of SEIS notification.
"Tourism and hospitality is the industry that has seen the worst impact of COVID-19 with a negative growth of 73 percent during the period April - December 2020 compared to the same period last year. Also, this is the sector that couldn't enter into the recovery phase since the eruption of COVID-19. As per a study report by McKinsey published in October 2020, recovery of the tourism sector to 2019 level may be as late as 2024," said Davar.
SEPC has suggested an alternate option to the government if they don't reach a consensus on SEIS. In a study commissioned by Ernst and Young, SEPC has come up with an option of Duty Remission on Export of Services Scheme (DRESS), which is said to be in line with the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme which was announced by the government for merchandise exporters.
"RoDTEP is not an incentive scheme rather a duty remission that is paid by the services exporters. Our proposed scheme is based on the principle that taxes should not be exported. We have also suggested a cap of Rs 5 crore on the benefits extended to any provider so that maximum benefit reaches the medium and small service providers under the scheme," said Davar.
First Published: Apr 26, 2021 11:45 AM IST
