20% TCS Roll-Back Welcomed by Travel Industry Experts

The recent decision by the Indian government to withdraw the increase of tax collected at source (TCS) on overseas tour packages has been met with a mixed response from the travel industry. While industry bodies and companies have expressed relief at the partial roll back, they have also highlighted that their long-standing demands have not been fully met.

A Welcome Step: Views from Industry Experts

Rajiv Mehra, president of the Indian Association of Tour Operators, acknowledged the positive step but emphasized that their main demand is for a reduction in the TCS percentage to 2.5%. This, he believes, would encourage more people to book through Indian tour operators, aligning with the government’s objective of broadening the tax net.

Jyoti Mayal, president of the Travel Agents Association of India, appreciated the government’s consideration of their request and recognized the partial relief it provides to travel agents in maintaining their competitiveness. However, Mayal urged the government to address compliance issues and ensure that transactions are overseen by travelers and banks, as agents often lack sufficient back-office support.

Mahesh Iyer, executive director and CEO of Thomas Cook (India), noted that the announcement brings clarity to the treatment of prepaid forex cards, which are commonly used by overseas travelers. They are now treated on par with credit and debit cards, eliminating any ambiguity in their taxation.

Rahul Garg, managing partner of tax and regulatory consultant Asire Consulting, highlighted that the government’s decision has addressed a major concern for the local travel industry. The application of the higher TCS rate will now only be triggered when the spend exceeds ₹7 lakhs per individual per annum, covering the majority of Indian individual travelers. However, Garg noted that the restoration of Rule 7 under current account regulations until September 30 still puts local travel agents at a disadvantage, as bookings made overseas with international cards would remain exempt from the TCS levy.

Bottom Line: Much Needed Relief, But Questionable Future

Overall, while the travel industry appreciates the partial relief provided by the government’s decision, there is a continued call for further reductions in the TCS percentage and considerations for compliance deliverables. The industry seeks a balance that supports their competitiveness, encourages more bookings through Indian tour operators, and ensures a level playing field for all stakeholders.