Foreign Travel To Get Expensive From July 1: MakeMyTrip's Mohit Kabra On LRS Impact | Trading Hour

Let me explain. The current provision has TCS at about 5%, and it's supposed to increase to 20% from July 1st. Currently, when a customer books in INR with domestic travel agents, the agents internally remit in foreign currency to the service provider overseas. The banks remitting this money ask for TCS compliance, so while it's not levied at the first payment from the customer, it becomes applicable at the second leg where the Indian travel agent remits money. Therefore, travel agents need to take it from customers when they book on their platforms or offline. It pretty much gets levied.

Correct. Right now it was 105, no, it will become 120. Another provision that has been removed: previously there was an exemption of up to seven lakhs for travel bookings other than a tour package. So for an overseas hotel booking, the customer would not have paid the 5% TCS because of the exemption limit. But for a tour package, they always paid 5%. Now because the exemption limit has been withdrawn, practically all overseas travel spends will require customers to fork out an additional 20% in terms of cash flow. However, it's not an additional cost; it's more a cash flow issue because it needs to be paid upfront and you get the credit in your Form 26AS.

Pretty much seamless. The travel agent, MakeMyTrip in this case, remits the TCS to the treasury on the customer's behalf, and it gets reflected in the customer's Form 26AS, which is the tax credits form. They can immediately utilize it for adjustment against advance tax payments or their eventual tax liability at year-end. So either it gets offset against tax liabilities or they can claim a refund if the amount exceeds their actual tax payouts.

Yeah, no, no. See, it was a specific demand from the travel industry. Until now, because credit cards were kept out of the ambit, a lot of foreign travel was being booked on global platforms, escaping the TCS levy. Indian platforms or travel agents were coming out more expensive. Now there will be parity because across the board, whether a customer books on overseas platforms, directly with overseas suppliers, or with Indian travel agents, the TCS levy will be the same – the same 20% if that rate goes through. The only other anomaly that remains to be resolved is that when a customer books in INR on an Indian platform, the platform charges the TCS up front, so we collect about 120% on the platform. But when a customer books directly with an overseas hotel, he still pays only 100%, and the 20% will be levied on his card by the issuing bank later. That creates a potential shift in business because he sees 120 on Indian platforms and 100 on overseas direct bookings or platforms. We have been requesting that the entire administrative procedure of ensuring TCS levy should be centralized at the banks; the card-issuing bank should collect the TCS irrespective of whether the booking is on Indian platforms, overseas platforms, or directly with an overseas supplier. That would ensure a level playing field, parity in pricing, and no apparent price differences for the customer. That's the only other issue that remains to be addressed.