FAITH Urges The Government To Abolish TCS

Federation of Associations in Indian Tourism & Hospitality, requests the withdrawal of the proposed Tax Collected at Source (TCS) on outbound travel from October 1st as proposed in the Finance Bill 2020. Its imposition which was supposed to happen on April 1st was deferred on request from the industry. However, it was not abolished and it is now set to be levied on October 1st.

The association demanded the abolishment of the tax, as per them, it creates an unfair playing level for the outbound and inbound travel industry which is looking to restart from the ‘Base Zero’ and will be impacted by the imposement of the tax even it attempts to revive. 

The association said, “The TCS is uncompetitive Implementation of this proposal will have an unprecedented negative impact on Indian travel agents & tour operators.” 

the association further added, “India is now on Unlock 4 and travel corridors are now beginning to get opened up. Indian travel agents & tour operators are looking forward to some business income from revival of travel bookings. 

However, the TCS of 5% (10% on those without PAN) will instead of providing income to Indian travel agents & Tour Operators will shift it to Foreign-based travel booking agents & operators. This is due to its anti-competitive character against Indian travel intermediaries. This takes away their level playing field against foreign competitors.  As against these foreign-based travel booking agents & operators, Indian travel agents & tour operators are already more  expensive by the imposition of 5% GST on tours which foreign  travel agents & tour operators are not subject to when they sell the same product for Indians who are travelling outbound.” 

FAITH said that miscommunication and reconciliation issues over TCS collected will also lead to heavy additional cost of compliance for small companies (which are almost 95% in this sector) and will open up the potential for litigation for multiple small value transactions on reconciliations between consumers and travel companies. It will threaten the credibility of the travel fraternity and also the tax administration. The travel agents & tour operators are grappling already with their credibility and business at risk with the issue of noncash refunds from airlines due to COVID lockdowns and cancellations.  

FAITH said it is possible that the proposed TCS collection over the year may lead to an advance tax of an insignificant amount, which, will not move the needle even slightly in the cash flows of the tax revenues of the government. But for the numerous 60000 travel companies and their 20 lakh estimated employees across India, it will lead to loss of business, cost of compliance, litigations & an environment of distrust and will sound the death knell of many Indian micro, small & medium travel & tour companies which are reeling under the threat of globally funded e-commerce players.  Faith said that the Indian tourism industry is fully aligned to the nation’s need of enhancing tax compliance. Ensuring tax compliance on travel is already being effectively be done through pan cards/ Aadhaar cards/ passport detail records of the travel bookers. 

Hence FAITH has requested that the TCS on outbound travel as proposed in the Finance Bill 2020 U/S 206C & abolish its proposed implementation completely as it is highly regressive and anti-competitive tax on the Indian travel industry