International tour packages could get costlier by 5 per cent with the budget proposing to include ‘overseas tour packages’ under the collection of tax at source (TCS) regime. This will act as a dampener, say industry players.

Subhash Goyal, chairman of STIC Travel Group and chairman, ASSOCHAM National Council on Tourism & Hospitality, said the 5 per cent tax would discourage people from travelling abroad. "There is a good possibility that the tour operator will pass on the taxes to the customers,” he said.

According to the Budget documents, a seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of five per cent. In non-PAN/ Aadhaar cases, the rate shall be ten per cent.

According to Indroneel Dutt, CFO, Cleartrip, from a broader TCS perspective, the industry has been asking the government to get rid of the TCS in the aviation industry as it is a well-regulated industry as it puts an undue burden on the OTAs. While that has not been addressed, he is hopeful that it will be addressed in the future.

Speaking about the current TCS regime, Dutt explained that this regime is for those operators who buy and remit overseas tour package cost to the package providers. What this means is that 5 per cent of the amount collected from the customers will be given to the government as revenue for an overseas tour package.

There are multiple impacts, “There is a question of taxability of tour operators, the government will get revenue and tax from the tour packages. Ideally, it should not be passed on because the operator could get remittance from the taxes. However, this could also potentially mean that tour packages will be costlier as the operators pass on this amount to the customers.”

During her speech, Finance Minister Nirmala Sitharaman said that the tourism industry would get a fund allocation of ₹2,500 crore. The Finance Minister has also laid stress on the development of archaeological sites into iconic sites with on-site museums. Five such sites are- Rakhigarhi, Hastinapur, Shivsagar, Dholavira and Adichanallur. The government has also announced the renovation of 4 key museums.

She also announced that the government plans to set up 100 more airports by 2025 under the Regional Connectivity Scheme (RCS), also known as UDAN or Ude Desh ka Aam Naagrik.

The industry players welcomed these and said that it would be a great booster for inbound and domestic tourism. Vishal Suri, Managing Director, SOTC Travel said, The Budget 2020 announced measures to boost further and create a momentum in the overall tourism sector. The overall allocation of ₹1.7 lakh crore for transport infrastructure in 2020-21, will revitalise the untapped and unexplored destinations in India.”

Suri said that the new personal income tax regime would put higher disposable incomes in the hands of the individuals, by allowing an option of a lower rate regime.

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