TAAI Urges Government to Abolish TCS Ahead of October 1 Deadline

Posted on    30 September 2023

The Travel Agents Association of India (TAAI) has made a plea to the Indian government to reconsider or delay the implementation of the Tax Collection at Source (TCS) on foreign remittances, which is set to become applicable from October 1. The government has raised the TCS on foreign remittances under the Liberalised Remittance Scheme (LRS) from 5 percent to 20 percent, and this will apply to various international transactions, including international travel, sending money abroad, and other remittances.

TAAI's President, Jyoti Mayal, has written a letter to Finance Minister Nirmala Sitharaman, expressing concerns about the impact of this decision on the travel industry. Here are some key points raised in the plea:

  1. Business Loss and Complexity: TAAI argues that the TCS implementation will create significant challenges for the travel industry and potentially divert business to overseas tour operators.
  2. Double Impact with GST: With the Goods and Services Tax (GST) already affecting the livelihood of Indian tour operators engaged in outbound tours, the introduction of TCS is seen as a double blow to the industry.
  3. Competitive Disadvantage: Indian tour companies may become less competitive compared to operators outside India who can avoid both the 5 percent GST and the TCS, which ranges from 5 to 20 percent. Additionally, these foreign operators are not required to register in India.
  4. Monitoring Limits: There are concerns about the ability of the Reserve Bank of India and banks to effectively monitor the limits of Rs 7 lakh per traveler, and there is a lack of mechanisms to track such transactions.
  5. Ambiguity with Credit Card Payments: There is uncertainty regarding payments made for these packages through credit cards overseas.
  6. Risk to Passengers: TAAI emphasizes that there could be significant risks associated with overseas companies, including issues related to the quality and reliability of services, potentially leading to service delivery problems or even instances of fraud.

TAAI's plea to the finance minister is to either abolish the TCS on overseas tour packages entirely or at least defer its implementation until the next financial year. The association believes that a detailed discussion on this subject is needed to address the concerns raised by the travel industry.

The government will need to weigh these concerns against its revenue collection goals and overall economic policies to determine the course of action regarding the TCS on foreign remittances.

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