Government Considers Imposing Tax on International Travel

Government Considers Imposing Tax on Foreign Travel Amid Crude Cost Hike

The Indian government is reportedly considering the imposition of a tax, cess, or surcharge on foreign travel, according to sources cited by CNBC-TV18 on May 15. The proposed tax is expected to be temporary, lasting for one year, and will directly flow to the Centre, rather than being part of the divisible pool.

The tax is intended to mitigate the impact of higher crude and import costs resulting from the ongoing US-Iran conflict. The conflict has led to a significant increase in crude oil prices, with oil trading above $100 a barrel after Iran's closure of the Strait of Hormuz choked off a fifth of global supply.

India's Tourism Sector Faces Challenges

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India's tourism sector, worth $231.6 billion, is the world's eighth largest and supports a tenth of its jobs. However, the sector is facing challenges due to rising global inflation and increased air fares. Carriers have hiked fuel surcharges, making overseas travel more expensive, and costlier hotels and transport overseas are also contributing to the hike.

Industry bodies are urging the government to boost inbound tourism to offset foreign exchange outflows. India's outbound departures have risen nearly 6% to 32.7 million in 2025, driven by rising incomes, easier visa access, and social media influencers.

Industry Sees Opportunity in Domestic Tourism

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Modi's speech has given a fresh boost to momentum towards domestic tourism, according to EaseMyTrip. However, analysts say it is a plea rather than a policy change, and expect near-term pain. Travel industry executives see this as a perfect opportunity to renew the 'Incredible India' marketing campaign and attract more overseas travellers to help the country earn precious foreign exchange.

Industry experts, such as ixigo's Group CEO Aloke Bajpai, have called for a marketing drive to woo more overseas travellers to India. Bajpai believes that while Indians are spending on international travel, the country is not getting enough foreign exchange from inbound tourism. He has called for a fresh push to the Incredible India campaign to attract more tourists.