Introduction of TCS could make international tour packages 5 per cent costlier

International tour packages could get costlier by 5 per cent with the Budget proposal to include them under the tax collected at source (TCS) regime. This will act as a dampener, say industry players.

Subhash Goyal, Chairman of the STIC Travel Group and Chairman, Assocham National Council on Tourism & Hospitality, said the 5 per cent tax will 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 package, who receives any amount from any buyer, shall be liable to collect TCS at the rate of 5 per cent. In non-PAN/Aadhaar cases, the rate shall be 10 per cent.

According to Indroneel Dutt, CFO, Cleartrip, the industry has been asking the government to get rid of TCS in the aviation industry — a well-regulated one — as it burdens online travel agencies (OTAs). While that has not been addressed in the Budget, Dutt expressed hope that it would be, in the future.

Current TCS regime

At present, the TCS norms apply to operators who buy overseas tour packages and remit the money to the package providers. This means 5 per cent of the amount collected from the customers will be given to the government as revenue for an overseas tour package.

The new proposal will impact the industry in many ways, said Dutt. “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 has the potential to make tour packages costlier as the operators pass on the expense to customers,” he added.

Welcome decisions

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

The FM also announced that the government plans to set up 100 more airports by 2025 under the Regional Connectivity Scheme, also known as UDAN.

Industry players welcomed these, saying they will boost inbound and domestic tourism. Vishal Suri, Managing Director, SOTC Travel, said: “The Budget announced measures to further boost and create a momentum in the 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 added that the new personal income-tax regime will put higher disposable incomes in the hands of individuals by offering them a lower rate regime.