Reduce GST by 5% for travel & tourism

With the disastrous effects that Covid19 had on everyone's lives, businesses and the Indian economy, the expectations from the upcoming Union Budget 2021 are sky-high. The unemployment rate even though has come down from 23.52 per cent in April 2020 to 9.06 per cent in Dec 2020, is still on the higher side.

As per the latest report by McKinsey by 2030, India needs to generate 90 million non-farming jobs over the next decade (this is not accounting for 55 million women who might join the workforce), which is possible if the GDP growth remains consistently above 8 per cent. But this year's GDP growth is just 4 per cent.

At Atlas Integrated Finance, we have identified some sectors which can help India solve its falling GDP and unemployment problem, if those sectors get the necessary support from the government in this Budget. We think the necessary exemptions in the below sectors will pave the path for a resounding growth of the economy.

The housing sector

Housing is a sector that helps in creation of both direct jobs (construction workers, carpenters, plumbers, engineers etc.) and indirect jobs (in cement, steel, paint, power and many of the ancillary industries associated with housing.) in India. There is a large level of unsold inventory in cities like Mumbai, Delhi NCR region, Bangalore, Pune and, Chennai.

As per section 24 of the Income tax Act 1961 an assessee is eligible for interest deduction of only Rs 2 lakhs on the interest paid on housing loans. An increase in this ceiling limit should incentivise home buyers. This coupled with the reduction of stamp duty charges below 5 per cent can give boost to the housing demand and lead to record high registrations as seen in Maharashtra as on Dec 2020.

The automobile industry

The automobile sector has witnessed a lot of problems due to reduction in demand, cost increase due to regulatory changes and emission and safety norms, insurance, premium for five years and road tax registration increase have led to almost 30 to 40 per cent price increase in the various automotive segments.

Some of the steps like reduction of the GST tax rates to 18 per cent, introduction of the incentive based vehicle scrappage policy to scrap over 15-years old commercial vehicles, local sourcing of automobile parts and EV incentives for electric vehicle buyers are some of the triggers for boosting demand in this sector.

The travel and tourism industry

There have hardly been any positive announcements or stimulus announced by the government to support the travel and tourism space that was beaten down due to the pandemic outbreak. The sector needs a revival plan starting with a reduction in GST to 5 per cent, infrastructural developments, creation of tourism sites into world class tourist destinations, along with easing the visa approval process.

(The author is CMD, Atlas Integrated Finance, he has a 25 years expertise in financial space)