TCS Tightening the Noose

In a post-GST and COVID environment, the government bowled a bouncer with the introduction of a 5 per cent TCS on outbound travel. For an industry that was and is still gasping for a fresh lease of life, it was a hit below the belt. Immediate appeals and representations followed hoping for review and redressal but barely had the industry put its pen down to take a breather, the "Death Knell" struck! or at least that is how it is widely perceived. TCS rates are now hiked to 20 per cent and with the passing of the finance bill in the parliament is now a law. The industry stands shellshocked, still trying to find the rationale behind this move. TTJ spoke to the captains of the industry to understand the implication, impact, and fallout of this move.

- Gurjit Singh Ahuja

T extolling the virtues of tourism as a major engine of growth and employment generation and overjoyed to learn that the government intended to move Tourism into "Mission Mode." Industry stakeholders were confident that the tourism industry, which accounts for 5.8 per cent of the country's GDP and contributes 178 billion USD to the economy, was finally poised to get due recognition and some tangible support from the government. But there is much of a slip between the cup and the lip, and as soon as the hike in TCS rate from 5 per cent to 20 per cent was proposed, the positivity vanished. he industry was delighted to hear the finance minister

So why this hue and cry?

TCS is only applicable to outbound travel transactions and we have domestic travel, a very large chunk of it to cater to. "Dekho Apna Desh" is the new mantra, look inward and grow! With all due respect, the domestic travel opportunity is holistically huge on face value, but a very large chunk of it falls under religious, pilgrimage, and VFR categories where the role of the travel agent is completely missing in the value chain or hitherto performing a very limited role.

Yes, there is a domestic corporate and business travel market and also a market for domestic leisure and the agents are already handling that. The point to be noted here is that outbound travel is the other major half or more of any travel agent's business mix and accounts for more than half his revenue and earnings. A hike in TCS rates affects this outbound business by loading the expense outlay of a customer who in all likelihood is already a taxpayer paying advance tax or TDS on his salary or income.