The Travel Agents Association of India (TAAI) and Travel Agents Federation of India (TAFI) have once again appealed to the Ministry of Finance, Government of India, seeking the abolition of Tax Collection at Source (TCS) for Overseas Tour Packages. The appeal follows a series of communications between TAAI and TAFI and the concerned authorities, including the Ministry of Finance and the Central Board of Direct Taxes (CBDT), regarding the challenges faced by the travel industry due to the proposed implementation of TCS.
Both the associations have not only requested a meeting with the ministry to discuss the matter of TCS but has also appealed for the postponement of the scheduled increase in TCS, which is set to take effect from October 1, 2023.
In a detailed letter addressed to the ministry, TAAI and TAFI highlighted the significant challenges posed by the TCS and its potential impact on the travel industry. According to the governemnt’s circular no 10 of 2023 dated June 30, 2023, the TCS rate is set at 5 per cent for overseas tour packages with a cost of up to INR7 lakh. Any additional amount beyond this threshold will be subject to a TCS rate of 20 per cent.
The travel industry, particularly travel agents and tour operators in India, is grappling with the repercussions of the TCS, which has reportedly led to a diversion of business to overseas tour operators operating from India. This shift has not only affected the revenues of the Indian government through income tax and GST but has also impacted the livelihoods of Indian tour operators involved in outbound tours.
Additionally, concerns have been raised regarding the potential risks posed by overseas companies that may not deliver services as expected, raising questions about quality and sustainability. The absence of a mechanism to monitor the INR 7 lakh per traveler limit and uncertainties regarding payments made for such packages using overseas credit cards have added to the industry’s apprehensions.
TAAI said its previous representations on the matter have consistently called for the complete abolition of TCS on overseas tour packages. The association has emphasised the need for an effective monitoring mechanism that eliminates any loopholes, benefiting Indian citizens, tour operators, and the government alike.In its latest appeal, TAAI has urged the Ministry of Finance to postpone the implementation of TCS and engage in a consultative dialogue with the association, which has been a prominent representative of travel agents and tour operators in India since 1951. This, TAAI suggests, should remain deferred until the next financial year, allowing for further discussions and deliberations.
Whereas TAFI also requested the finance minster to take action on the matter and asked the government to roll back TCS on foreign tours and instead mandate a standard 2.5 per cent charge on all foreign spends by individuals who hold a valid PAN Card.
“It is our understanding that originally TCS on overseas tours was envisaged to track those who don’t pay taxes and yet spend money on overseas travel. This could effectively be achieved by levying a standard 2.5 per cent TCS on all foreign spends across all channels. This would also eliminate the need for complex monitoring systems to track spending across multiple channels and platforms. This will create a level playing field, eliminate the bias in favour of overseas tour operators and the travel industry of India will have a fair chance to compete on the global stage, ” TAFI President Ajay Prakash said in the letter to the Finance Minister.
Prakash added that they are anticipating positive response from the government at the earliest.”All we’ve got is a response saying it’s been forwarded to the the appropriate department,” he said.
With the implementation date of TCS just three days away, TAAI awaits a response from the ministry, emphasising the urgency of the matter and the need for a collaborative resolution that addresses the concerns of all stakeholders involved in the travel industry.