International tour packages could get costlier by 5 per cent with the budget proposing to include ‘overseas tour packages’ under the collection of tax at source (TCS) regime. This will act as a dampener, say, industry players.

There is a good possibility that the tour operator will pass on the taxes to the customers,” he said.

According to the Budget documents, a seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of five per cent. In non-PAN/ Aadhaar cases, the rate shall be ten per cent.

There are multiple impacts, “There is a question of taxability of tour operators, the government will get revenue and tax from the tour packages. Ideally, it should not be passed on because the operator could get remittance from the taxes. However, this could also potentially mean that tour packages will be costlier as the operators pass on this amount to the customers.”

During her speech, Finance Minister Nirmala Sitharaman said that the tourism industry would get a fund allocation of ₹2,500 crore. The Finance Minister has also laid stress on the development of archaeological sites into iconic sites with on-site museums. Five such sites are- Rakhigarhi, Hastinapur, Shivsagar, Dholavira and Adichanallur. The government has also announced the renovation of 4 key museums.

Money Changers for the international tour:

But, how will purchase of foreign currency from Money Changers operationally get them to levy TCS? “The implementation of TCS for a small money changer who mainly deals in cash and who may not be able to have access to customer’s spending under LRS or that in cases of use of international debit and credit cards would be clear once RBI issues necessary guidelines to implement this scheme,” says Motwani.

Refund:

The actual impact is not making your international travel expensive as the individual can ask for a refund while filing an income tax return (ITR). “TCS paid by the customers can be adjustable when individuals who would have paid TCS file their income tax returns,” says Motwani. However, that will be applicable if you file your ITR. “If the budget proposal is implied on the entire LRS scheme, then buying forex will get costlier only for those who are not paying and filing tax returns,” informs Motwani.

What to do

Even though it is not a tax and will not make your foreign travel expensive directly, your outgo will increase. “From April 1, 2020 one needs to shell out additional funds for tour packages and foreign remittances (exceeding Rs. 7 lakh in a financial year) though the credit for the taxes collected will be available to offset your income tax liability while filing your Income-tax return, it will be certainly lighter on your pocket if you can plan your tour in advance and book it by March 31, 2020, and front load the remittances within the current financial year to save the additional cash outflow of 5 per cent”, said Amitabh Sethi, a Delhi based chartered accountant to FE Online in an earlier communication.