Concern among companies due to increase in TCS tour packages

Many domestic online tour operators express concern that this rapid growth will put them at a competitive disadvantage. Their international competitors, who are exempt from charging TCS from Indian customers, may woo their business. This potential change could see Indian travelers bypassing local companies altogether and turning to international operators for booking their holidays.

Foreign exchange purchases using debit or credit cards have been exempted with clarifications issued recently by the government 7 lakh from TCS, if a traveler were to buy a tour package from an international operator 7 lakh, then he will be exempted from paying TCS. Although Indian tour operators accepting payment for tours in rupees are not subject to TCS, when they pay their international vendors abroad for providing that service, it is in foreign currency. And, tour operator bodies say this will result in huge losses for Indian companies.

“This move is likely to kill our own travel and tourism industry. This may lead to unemployment and the government will be out of GST collection. Now nothing stops a traveler from buying a tour package 7 lakh from an international operator, who is not charging the same TCS,” said Rajeev Mehra, president of the Indian Association of Tour Operators. Global travel platforms that could result in them losing even more business than they had since the TCS of 5% was first introduced a few years ago.

Mohit Kabra, group chief financial officer of Nasdaq-listed MakeMyTrip, said the government’s intention appears to be to collect TCS on large foreign exchange expenditure for foreign travel paid for only through international debit and credit cards, adding that a lot There is ambiguity which should be addressed as appropriate notifications are issued in the coming days.

Rajeev Mehra said: “Earlier also, we approached the Prime Minister’s Office to suggest that 20% TCS on tour packages is too high and people will stop booking through tour operators here and this will cause a lot of damage to the sector. More unemployment may arise. ,

The government last week issued a notification stating that the use of international credit cards abroad by individuals abroad would be subject to tax collected at source (TCS). It later clarified that foreign exchange purchases using debit or credit cards 7 lakh was exempted.

The move may reduce outbound travel booked with Indian companies in the short term, as many travelers and companies may find it difficult to afford upfront deductions of more than 20% for their holiday expenses.

This means, the government does not intend to levy TCS on small transactions and it will be applicable only on travel services booked by an individual 7 lakh per financial year and paid through international debit or credit cards. These cards are specifically called out in the Explanation as they enable foreign exchange remittances.

Therefore, small foreign travel services booked in Indian currency through Indian travel agents using domestic cards, or UPI (as these are not enabled for foreign currency remittances) will remain outside the purview of LRS as well as TCS provisions .

Mohit Kabra said: “There is no reason why tour packages should not be treated at par with domestic card or UPI transactions, as many a time first-time senior citizens prefer to take tour packages rather than manage multiple bookings on their own Are.”

He added that it would help if section 206C(1G) of the Income Tax Act, 1961 was amended to provide that, “TCS at the rate of 20% shall be levied on persons booking foreign travel itinerary or foreign travel services by an authorized dealer.” Will put 7 lakh per financial year and paid through an international credit or debit card,” so that there is parity between paying through an international card for an Indian customer; booking a bundled tour program, or through a travel agent Unbundled travel services availed will be charged as TCS to the card issuing bank of the customer.

But Travel Online Inc. CFO Rohan Mittal said the impact may not be very significant. “Travel is booming right now, we don’t see this as a big loss for leisure travel. The consumer has to adapt to the new norm. What would be welcome would be if the government refunds TCS every quarter instead of annually.”

Ashish Gupta, Consulting CEO, The Federation of Hotel and Restaurant Associations of India, said, “Tax netting is important for a healthy economy, but the very low TCS rate on international travel (increased from 5 to 20 % in this year’s budget) would probably have achieved the same objective.