Domestic travel operators welcome TCS rollback, but say move is a partial relief

New Delhi: Travel industry bodies and companies have welcomed a “partial relief” granted by the government by withdrawing the increase of tax collected at source (TCS) on overseas tour packages from 5% to 20% on amounts up to ₹7 lakh per annum. But they said their long-standing demands have still not been met.

“Though we are happy with this roll back, our long-standing demand is that the TCS should be reduced to 2.5%, as the main objective of the government is to bring more people into the tax net and if the government reduces the TCS percentage on overseas tour packages, a higher number of people will book through Indian tour operators,” said Rajiv Mehra, president of the Indian Association of Tour Operators.

Jyoti Mayal, president of the Travel Agents Association of India, said this was a partial relief for the country’s travel agents on somewhat retaining their competitiveness against global players. “We are thankful to the PM and the finance minister for considering our request. But, going ahead, the government needs to consider the compliance deliverables for agents. The transaction needs to be under the purview of the traveller and the bank as the agents do not have much back-office support,” she added.

Mahesh Iyer, executive director and CEO of Thomas Cook (India), said the announcement brings in clarity on prepaid forex cards (the preferred mode of transactions for overseas travellers), now being treated on par with credit and debit cards.

Rahul Garg, managing partner of tax and regulatory consultant Asire Consulting, said the government has addressed a major adverse business implication for the local travel industry, as the application of higher rate in case of the second limb of TCS provisions (post September 30) now triggers only when the spend crosses ₹7 lakhs per individual per annum, which would cover majority of Indian Individual travellers. “Hence, the larger issue seems to have completely been addressed. The restoration of Rule 7 under current account regulations till September 30 would however result in a continuous disadvantageous position to the local travel agents as the bookings made overseas through international cards would still be out of the clutches of the TCS levy under the first limb,” he said.