Travel industry concerned over viability

Taking no chances: A train commuter wearing a face mask as a precaution, on Wednesday.

Taking no chances: A train commuter wearing a face mask as a precaution, on Wednesday.  

COVID-19 scare and 5% TDS on international packages hit tourism business hard

The travel industry has said that the panic caused by novel coronavirus (COVID-19), coupled with the new 5% tax on international travel packages from April 1, will make it very difficult for travel agents to sustain their operations.

This has forced many in the tourism business to switch to a cash-only system to retain customers. The recent Union Budget had proposed that a seller of an overseas tour package should be liable to collect TDS (tax deducted at source) at 5%. This is, however, not applicable to customers directly booking through, Expedia, or hotels.

Tour operators are liable to charge the amount when the package is bought. If PAN or Aadhaar is not produced by the buyer, the tax will be charged at 10%. The Budget 2020-21 has also mandated a 5% tax collection at source for remittances of over ₹7 lakh.

In an online petition to Prime Minister Narendra Modi, Travel Agents Association of India (TAAI) said the business of Indian companies would eventually be transferred to overseas travel companies by travellers directly resulting in a loss of tax revenue for the Indian government.

Indian travel agents will now have to pay TDS on a monthly basis and file returns for the same on a quarterly basis. This is in addition to the existing compliance of GST and other filing, which will entail extra time and additional costs and also risks job losses for those employed in the travel trade.

“International online travel companies and foreign tour operators with a base outside India are booking air tickets, hotels and tour packages directly for travellers without collecting any GST or taxes. They shall not even collect income tax at source (TCS),” TAAI vice president Jai Bhatia said.

Travel agents said the introduction of TCS will increase compliance cost of the local companies and will be contrary to the ease of doing business. “At present, 5% GST is collected from the traveller and paid to the government. This is already uncompetitive vis-a-vis global traveller companies as many travellers are booking directly with overseas vendors,” TAAI said.

Assocham National Council on Tourism and Hospitality chairman and STIC Travel Group chairman, Subhash Goyal, said the 5% 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.

Tour operators also pointed out that in case of cancellation of a package, there is no provision for refund of the amount to the consumer by the travel company. “Credit for the same can be availed by the consumer when filing tax returns,” Reji Philip of Fort-based travel agency Cosmos said.

A letter from the Editor

Dear reader,

We have been keeping you up-to-date with information on the developments in India and the world that have a bearing on our health and wellbeing, our lives and livelihoods, during these difficult times. To enable wide dissemination of news that is in public interest, we have increased the number of articles that can be read free, and extended free trial periods. However, we have a request for those who can afford to subscribe: please do. As we fight disinformation and misinformation, and keep apace with the happenings, we need to commit greater resources to news gathering operations. We promise to deliver quality journalism that stays away from vested interest and political propaganda.

Support Quality Journalism
Related Topics
Recommended for you
This article is closed for comments.
Please Email the Editor

Printable version | May 25, 2020 4:21:01 PM |

Next Story