News

Published: June 30, 2023
Updated: June 30, 2023

Relief for Tour Operators as Government Defers TCS Hike on Overseas Packages

In a welcome move, the Indian Association of Tour Operators (IATO), the apex body representing more than 1,700 tour operators in the country, expressed gratitude to the government for deferring the hike in Tax Collection at Source (TCS) on overseas tour packages until September 30, 2023. While appreciating the partial relief, the IATO reiterated its demand for a reduction in TCS to 2.5 percent, stating that it would encourage more people to book through registered Indian tour operators. The recent government decision to exclude overseas payments made via international credit cards from TCS and include them under the Liberalised Remittance Scheme (LRS) was also praised.

Deferral of TCS Hike and Calls for Reduction:

The IATO thanked the government for deferring the TCS hike until September 30, 2023, and withdrawing the proposed increase from 5 percent to 20 percent on amounts up to Rs 7 lakh per annum. However, it emphasised the need for further reduction to 2.5 percent, asserting that it would align with the government's objective of expanding the taxpayer base. By lowering the TCS percentage on overseas tour packages, more individuals would choose registered Indian tour operators instead of booking directly with foreign operators or online platforms not liable to collect tax at source.

Implications of Government's Decision:

The government's recent decision not to levy TCS on overseas payments made through international credit cards and incorporating them into the LRS was well-received by industry experts. Thomas Cook (India) Ltd Executive Director & CEO Mahesh Iyer hailed the deferment of the TCS rate increase to 20 percent under the LRS until October 1, 2023. This move is seen as promoting a level playing field and encouraging discussions with relevant stakeholders in the travel services industry. Iyer also commended the government for bringing clarity regarding the threshold of Rs 7 lakh per individual per financial year across all payment modes.

Creating a Favourable Environment:

The deferment of the TCS hike and the clarification on payment thresholds is expected to support the recovery of the travel industry, which has been significantly impacted by the global pandemic. Thomas Cook (India) emphasised that the government's announcement brings much-needed clarity, particularly regarding prepaid forex cards, which are now treated on par with credit and debit cards. Domestic travel agents, who previously faced a disadvantage compared to overseas service providers, welcomed the government's intent not to levy TCS on small transactions and the exclusion of payments made with international debit or credit cards within the Rs 7 lakh limit from the LRS.

The tour operators' apex body and industry leaders have expressed gratitude for the government's decision to defer the TCS hike on overseas tour packages and exclude payments made through international credit cards from TCS. While appreciating the relief, the demand for a reduction in TCS to 2.5 percent remains. The government's steps are expected to create a level playing field, foster industry discussions, and provide much- needed clarity to the travel services sector. The recent measures will contribute to the recovery of the travel industry, which has been significantly impacted by the ongoing global pandemic.