The Travel Agents Association of India (TAAI) has formally communicated with India’s Finance Minister, Nirmala Sitharaman, to earnestly request the government’s reconsideration of Tax Collection at Source (TCS) on overseas tour packages.
This appeal by TAAI comes at a crucial juncture, as the Indian government has decided to raise the TCS rate on overseas tour packages from 5 percent to a substantial 20 percent, effective from October 1, 2023. The association has implored the Finance Ministry to consider the complete elimination of TCS, underlining the significant operational hurdles it poses to travel agents.
TAAI President, Jyoti Mayal said, “There is a pressing need to revoke the 5 percent TCS on overseas tour packages. If the proposed rate increase is implemented, it could have detrimental consequences for travel agents’ businesses. Elevating the TCS rate not only amplifies the financial burden on end customers but also grants an unfair advantage to international online booking platforms and websites, while simultaneously encouraging direct hotel bookings. This shift in business towards international entities is due to the significant savings clients can obtain by booking directly, avoiding both the 5-20 percent TCS and the 5 percent Goods and Services Tax (GST) applied to outbound tour packages.”
It is noteworthy that in the previous Union Budget, the government decided to increase TCS on foreign remittances through the Liberalised Remittance Scheme (LRS) from the prevailing 5 percent to 20 percent, excluding specific cases.
Additionally, a prior government notification affirmed that there would be no alteration in the TCS rate for all transactions under LRS and for overseas travel tour packages, regardless of the payment method, for sums up to Rs 7 lakh per individual per annum.
TAAI’s communication with the Finance Ministry also brought attention to the prevailing challenge: the lack of an established mechanism in financial institutions, including banks, to monitor the Rs. 7 lakh threshold for overseas travel expenditures.