The Travel Agents Association of India (TAAI) has urged Finance Minister Nirmala Sitharaman to postpone the implementation of the revised 20% tax rate on travel packages worth more than Rs 7 lakh.
TAAI has petitioned the government to suspend the implementation of the revised tax rates that will come into effect from October 1.
“Currently the RBI/Banks do not have the capacity to maintain and monitor the limit of Rs 7 lakh per passenger and there is no mechanism to track the limit. We request a mechanism to be put in place so that monitoring can be effective and without loopholes,” TAAI’s letter on Wednesday expressed in.
Travel agencies also noted that they risk losing business from foreign tour companies as tax rates increase. “Indian travel companies are already less capable than operators operating outside India, who save on 5% GST and TCS (5% to 20%) and are not registered in India,” TAAI wrote.
The revised tax rate is part of the budget proposal and will take effect in July. However, its implementation has been delayed to allow banks and credit card companies to roll out the necessary implementation.
Initially, the government proposed to increase the income tax rate on remittances and overseas travel packages from 5% to 20% under the liberalized remittance scheme. The government has also removed the Rs 7 lakh threshold for taxing the source of remittances. The amendment does not apply to remittances for educational and medical purposes.
After opposition from the industry, the government has retained the threshold of Rs 7 lakh per person for all categories of remittances, regardless of mode of payment.