The Board of Federation of Associations in Indian Tourism & Hospitality (FAITH) has appealed to the government to withdraw the increase of Tax Collection at Source (TCS) on the overseas tour packages from 20 percent to 5 percent announced in the Finance Bill 2023.
Such a move has put domestic tour operators at a disadvantage as the bookings are moving to foreign tour operators as they are not liable to deduct this charge, the body said.
FAITH board is also requesting government to reduce TCS from 5 percent to 2.5 percent so that more and more people book their foreign trip through tour operators based in India and the avowed objective of bringing more people into the tax net is also met.
This step of raising the TCS has greatly undermined the business prospects of Indian tour operators who were just seeing revival after reeling long under the impact of pandemic, said FAITH in a note.
According to Nakul Anand, Chairman FAITH, this is like a bolt from the blue. "This will make our domestic tour operators uncompetitive versus the foreign tour operators and they would not just face huge stress but this can potentially lead to business shutdowns and loss of jobs."
He added that the objective of introducing TCS on foreign travel is to bring more and more people to the tax net. However, this purpose would not be served as the travelers would simply start booking with foreign tour operators. "Also post the digitisation the lines between inbound, domestic, and outbound tour operators have blurred. With inbound still not recovered, losing business in outbound to global players will hurt Indian travel MSME companies, who make up for more than 95 percent of the industry."
TCS is applicable at the booking of the international tour package through an Indian tour operator.
Online travel operators point out that higher TCS will not only increase the upfront cash outflow for customers but will also give an unfair advantage to foreign-based online travel booking platforms over India-based travel agents and tour operators.
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