SEIS disappoints industry

Ministry of Commerce & Industry has released amended rates for SEIS claims for FY 2019-20, but tour operators and hotels are not happy with the cut in percentage and capping of payment.

Nisha Verma

Service Exports from India Scheme (SEIS) for services rendered in the Financial Year 2019-20 have been due since March 2020. It has been a long standing demand by the industry, and now in the latest amendment to the rates, a limit on the total entitlement under SEIS has been imposed for service exports rendered in the period 1st April 2019 to 31st March, 2020, and capped at Rs. 5 crore per IEC. Also, the admissible rate in percentage, on net Foreign Exchange Earnings, for FY 2019-20 has been reduced from 7% to 5% for travel agencies and tour operator services, and from 5% to 3% for hotels. The industry of course, is disappointed. Rajiv Mehra, President, IATO, says, “We welcome the decision by the government to release the SEIS. However, the percentage of scrips we used to get earlier has been reduced from 7% to 5%, that too in these hard times for travel trade. In fact, the biggest dent has come to the bigger tour operators, as the government has put a cap of Rs 5 crore.”

Echoing the same thought, Jyoti Mayal, President, TAAI, shares that they have been sending regular recommendations to the Ministry of Commerce to increase the incentives to revive the industry. “Our main submission was 15% of SEIS during off season and 10% for season from October to March from 2020 to 2025. We had also suggested for a 10% SEIS instead of 7% for the previous year (2019-20) considering this was a crisis year. However, I think they have not even heard us and they have capped it from 3-5%, which I think will make it much more challenging an survival will get more difficult for this industry.”

Mehra adds, “At all forums, IATO has been advocating 10% SEIS, and if not possible, at least 7% with no capping. However, the government has given us a maximum of 5% SEIS, with a capping of Rs 5 crore for all sectors. In fact, some of the large operators have already spent this money on business promotion and this will be a very big loss to them.”

Crashed hopes of hospitality
The hospitality sector has been requesting the government for some time to release SEIS benefits for 2019-20 under Foreign Trade Policy of 2015-20, says KB Kachru, Vice President, HAI. “The benefits already accrued should have been released in May 2020. The hotel industry was hopeful that the government would enhance the SEIS benefits from 5% to 10% as it would infuse some liquidity into the cash strapped sector. The dependency of the hotel industry being high on import of goods to maintain global standards warrants SEIS benefits to be lucrative to reduce the import cost.”

However, what happens is completely the opposite. “The reduction in percentage of SEIS benefits from 5% to 3% comes at a time when the industry is struggling for survival. The reduction of SEIS benefits is contrary to the expectations of the hotel industry.”

Plea to the government
Kachru urges “We strongly appeal to the government to reconsider their decision and enhance the percentage of SEIS benefits for hotels.”

Mehra adds, “The government is requested to at least raise it to 7 per cent and remove capping of Rs. 5 crore at least for the tourism and hospitality industry. We hope it will consider our plea.”