The Union Budget 2023 came with a conundrum for the tourism industry, on one hand, the idea of tourism on ‘Mission Mode’ is a breath of positivity, but on the other hand, the increase in the TCS (Tax Collected at Source) from 5 per cent to 20 per cent is taking the industry by storm.
Growth in the overall market as FM Nirmala Sitharaman announces significant aid to the industry by refocusing attention on pertinent tourism-related topics. The travel industry desperately needed a miracle to speed up the ins and outs of travellers after the impact of COVID. Many people rely on the tourism industry for their daily sustenance, making the tourism sector one of the key contributors to India’s economy.
The TCS deduction rule states that tax must be collected by the seller at the time the buyer’s account is debited, at the time the seller receives the money from the buyer in cash, at the time the seller issues a check or draught, or by any other method, depending on which occurs first. When it comes to TDS on salaries, tax must be taken off at the time of the actual payment.
The industry is negatively impacted by the rising costs of hotels and airfares, which makes it difficult for the Indian tourism sector to compete with those of other nations and is, therefore, unable to draw tourists. The Outbound Industry will get hit by the increase increasing Inbound Tourism. Where inbound tourism is a priority for every government, important to understand the reasons behind this major leap. Some of the thoughts from industry leaders –
Riaz Munshi, President, OTOAI
It’s highly disappointing from an outbound travel point of view. We requested the honourable Finance Minister to reduce the TCS percentage from 5 per cent instead the government has increased it to 20 per cent which is going to hamper our business and at the same time, there is going to be a huge deficiency in government revenue as people would prefer to either book through foreign tour operators or foreign OTAs to save GST and TCS both. At present also outbound tour operators and the government of India is losing revenue on the same grounds.
Naveen Kundu, Managing Director, Ebixcash Travel
“First and foremost I welcome the budget, it is one of the best budgets we’ve seen in recent times. In terms of tourism, business and the economy, I think it is fantastic. What they have done is put a lot of money into the hands of the public, which will result in people travelling more. When people have disposable income and money in their hands, they end up spending it largely on travel these days as the buying trends have shifted. With regards to TCS, I fully subscribe with the government as you need to understand the larger picture and not view it just from one angle.
If an outbound traveller has to travel and do a foreign holiday, it’s an aspirational product for them and they will have to pay tax on that. When they travel overseas they remit money to foreign operators and hotels which depletes our foreign exchange reserve and increases our fiscal deficit. To protect our fiscal deficit we have to ensure that we create a text mechanism where people only remit money when it’s necessary. The priority for any government is to make sure their inbound and domestic tourism flourishes.”
Madhavan Menon, Chairman & Managing Director, Thomas Cook (India) Limited
“The proposal in the Union Budget 2023, to increase the rate of TCS from 5 to 20 per cent for purchase of overseas tours & overseas remittances other than education will significantly increase the upfront cash outflow for end customers. It will drive more of these customers to use alternate channels that are outside the domestic tax net. We urge the Government to reconsider this.
Vineet Gopal, Director, Representation World
“It’s shocking that Budget proposes hike in TCS on overseas travel remittances out of India from 5 per cent to 20 per cent (without threshold). This would pose challenges for people intending to go for foreign travel as it will increase their immediate outlay.”
Praveen Ghai, Director Tom Travels, Joint Secretary ETAA NI
The TCS (Tax Collection at Source) for overseas tours & packages has been increased from 5 per cent to 20 per cent. This will hit the outbound tour & travel industry, especially since the industry has just started recovering after Covid-19. I don’t know who has proposed/recommended from Travel Industry to increase TCS from 5 per cent to 20 per cent.
Most of the travel agents who do Outbound Tourism will be affected badly. As a Joint Secretary of ETAA shocked that instead of abolishing it, the government has raised TCS from 5 per cent to 20 per cent. I know that this is going to have a direct effect on domestic tourism, numbers will be increased in domestic tourism and domestic tourism will see a boom.
In the past, as a Joint Secretary of ETAA, we have demanded many things from the government but nothing has been taken care of like a refund of GST for inbound tourists, “ITC for travel agents on interstate GST credit”. But, I am happy that the government has focused on the tourism sector with new airports & new trains for better connectivity in domestic tourism.
