Indian travel agents disappointed over the tax rate hike

The Indian government’s recent proposal to increase the rate of Tax Collection at Source (TCS) from the present five per cent to 20 per cent on outbound tour packages has not gone down well with the travel consultants as they believe the decision will be detrimental to their business.

Indian travel agents told TTG Asia that the higher rate will burden their customers and make them non-competitive.

The hike in TCS rate may dampen outbound travel demand and cause Indian travel agents to lose out on revenue

While the government had previously waived the TCS on inbound tour packages in August 2022, the new TCS rate on outbound tour packages is expected to be implemented beginning April 1 this year.

“The move will not only increase the cash outflow of end customers but will also give an unfair advantage to international online booking engines, and websites (that) promote direct hotel bookings,” said Rajat Sawhney, director, Rave Tours & Travels.

“The business will shift to international entities as booking directly with them will help a client to save 20 per cent TCS and five per cent Goods and Services Tax (GST) levied on outbound tour packages. It will also deprive the government of precious revenue which they could have otherwise earned.”

Indian travel agents had previously gone through various associations to urge the government to abolish the existing five per cent TCS, citing challenges the tax imposes on business prospects besides increasing compliance costs of local companies.

Subhash Goyal, chairman, STIC Travel Group, said: “Combined with the already expensive airfares, an increase in TCS rate will make the budget of a traveller go haywire. The hike in TCS rate may perhaps force people to request their friends and relatives abroad to book overseas hotels and packages for them, thus depriving Indian travel agents of their earnings.”

The Federation of Associations in Indian Tourism & Hospitality – the umbrella body representing 10 travel trade associations – has made a representation to the Indian government to revoke its decision.

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