With The TCS Being 20% From July 1, Travel Agents Are Not Thrilled; Here’s Why!

by Mallika Khurana
With The TCS Being 20% From July 1, Travel Agents Are Not Thrilled; Here’s Why!

According to a government decision, the TCS (Tax Collected at Source) on international vacation packages will rise from the current 5% to 20%. The new rates will be applicable from  July 1. Numerous trade associations have come together to demand that domestic travel agents be exempt from paying taxes on international vacation packages. Organisations like Assocham, and the Internet and Mobile Association of India have claimed that local travel agents are at existential risk. 

From July 1, TCS Rates Will Be Higher

Travel agents
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They addressed a letter to the Finance Minister, the Reserve Bank of India (RBI), and the Tourism Minister and requested TCS parity on all payment methods and travel packages. In this letter, they claimed that recent government initiatives had severely affected local players. 

Additionally, it has recently been made clear that purchases made with foreign credit and debit cards up to a total of ₹7 lakhs for international travel will not count toward LRS limits. Consequently, it will not be subjected to TCS. TCS will only accept reservations made through Indian travel agencies, not direct reservations made by foreign service providers.

In light of these drastic changes, industry bodies are demanding equality for all mediums. They believe that bookings made through local travel agents and international service providers must be priced equally. They have pointed out that the loss of business from local travel agents in India has suffered since the introduction of the TCS at 5%. With the rates going as high as 20%, the pricing gap will be more significant. It will lead to people choosing foreign service providers to make all the bookings.

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Many Travel Associations Are Opposing The Changes

Local Travel agents
Photo Credits: Canva

The claim makes it clear that domestic travel agents pay GST and other applicable taxes on all reservations. Contrarily, foreign service providers don’t. As per the statement, the GST loss for the Government of India on reservations made through domestic travel agents would be significantly higher than the net TCS collected. 

The Travel Agents Association of India (TAAI) and the Travel Agents Federation (TAFI) signed the letter in support of the claim. The PHD Chamber of Commerce and Industry and the Indian Association of Tour Operators also signed it.

Cover Image Courtesy: Canva