Home Travel Same threshold should apply for overseas tour packages, ET TravelWorld

Same threshold should apply for overseas tour packages, ET TravelWorld

by TopBusinessView

<p>Ajay Prakash, President, TAFI</p>
Ajay Prakash, President, TAFI

By Ajay Prakash

The latest amendment to the Finance Bill 2023, which brings all foreign spends on credit cards under the ambit of TCS, combined with the unusually high percentage of tax collection at 20 per cent, is utterly retrograde and is bound to affect travel.

For one, it will make accounting much more complicated, and it could also lead to unscrupulous individuals resorting to illegal means to avoid tax, bypassing the legitimate travel agent and tour operator – just the opposite of what the government intends. The complications and the consequent red tape are quite contrary to the spirit of facilitating “Ease of business.”

While in the immediate instance it will have the effect of devaluing the Rupee against all foreign currencies by 20 per cent it will also lead to increased paperwork for the credit card companies, too – they will need to deposit money in the government treasury and issue a certificate of TCS for every transaction. Most credit card companies charge a conversion fee between 3 to 3.5 per cent for foreign spends – will the TCS be applicable on the conversion fee too?

Unanswered queries?

What about delayed payments to card companies – would the TCS component be liable for penal interest too? What happens if a person totally defaults on a credit card payment – is the TCS to be borne by the card company? It is not clear how this move will impact business travel where the individual might make payment through a personal card, but expenses are debited to the Company. What about travel agents who legitimately make payment on behalf of clients – who will pay and who will claim credit for the TCS?

What about a person applying for a visa where the Consulate collects the fee in foreign currency? Is that also to be taxed at 20 per cent?

What about a traveller buying an international ticket on the website of a foreign airline, say for Dubai-London – will that also attract TCS at 20 per cent?

These are questions that ought to have been addressed before passing such a draconian legislation.

U-turn by the government
Now that the government has taken heed of public sentiment and wisely decided to amend the amendment by stipulating a there hold of INR 7 lakhs below which credit card spends will not attract TCS, it should also introduce the same threshold for overseas tour packages. “This will provide much needed relief to the aspirational middle class. Besides, tourism is a two-way street – if you don’t have enough outbound traffic, inbound will also suffer since airlines need traffic in both directions to maintain capacity and keep fares at a reasonable level.”

Credit cards transactions abroad under LRS: How 20% TCS will impact outbound travel from India?

The move will potentially increase the compliance burden for issuing banks, increase the cashflow of travellers and result in funds of individuals getting locked till the time actual refunds get initiated by the tax department at the time of filing income tax refunds. Till now, credit card spending was not counted as part of the LRS ceiling.

Indian traveller being discouraged to travel overseas
If the purpose is to nab tax evaders, it’s like using a hammer to kill an ant – the collateral damage far outweighs the perceived benefits. Even a cursory examination of the implications will show how ill-conceived this is – If an Indian resident subscribes to a foreign magazine, or buys software from a foreign company, or pays fees for an overseas conference, or even buys a coffee while travelling overseas, she would be liable for a 20 per cent TCS. What about a taxi from the airport to your hotel? There’d be 20 per cent TCS on that too. That’s quite bizarre!

The Indian traveller is being seriously discouraged to travel overseas and the travel industry, which is still to recover fully after the Covid-19 pandemic, and which relies greatly on Indians travelling overseas, earnestly implores the Government to reconsider the entire proposal to tax foreign travel and all overseas spends at 20 per cent.

The author is the President of Travel Agents Federation of India (TAFI) and CEO, Nomad Travels.

DISCLAIMER: The views expressed are solely of the author and ETTravelWorld.com does not necessarily subscribe to it. ETTravelWorld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

  • Published On May 20, 2023 at 11:31 AM IST

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