MakeMyTrip Decodes The New RBI Travel Rules

Thanks for having me. With the new rules coming in, travelers will have to initially fork out about 20 percent extra while making their travel bookings, although this would be reflected as credit in their tax returns in the form 26AS, so it can be claimed back. It's more an upfront paying out of an additional amount, but not necessarily an additional cost.

We've seen about 5 percent TCS getting levied a few years back, and we had seen a little bit of a dip coming through because of that. As this kind of a front charge comes in, for quite a few travelers it becomes an issue in terms of the total amount to be forked out, so that creates a dampening effect. The other thing is, if there's a gap in terms of how this TCS is collected by the various players operating in the market, it could also result in shifting of bookings from one player to the other, depending upon where the customer sees better pricing. That's the reason we are seeing a significant amount of loss of business from Indian travel agents to probably the overseas travel agents.

Sure. This is one of the independent requests that we had made, saying that there used to be a rule where FEMA LRS rules were not applied on international credit cards, and that was kind of fine, providing an escape route on various bookings as far as the TCS levy is concerned. Now that the new rule has come in and this particular aspect has been omitted, TCS will be applicable irrespective of how the customer makes the payment, whether it is on their debit cards or on their credit cards. It will be a consistent levy irrespective of the manner in which the customer is making the payment. Until now, particularly when it comes to a lot of the global OTAs, customers used to be making their payments via international credit cards, and therefore the TCS collection was escaping attention. This will now be brought into the net. It's been a long pressing demand from the Indian travel industry, and it's good to see that this has been addressed.

Yes, there's a slight difference over there, and that is what is bothering us when it comes to booking with the domestic travel agent. If you book with a domestic travel agent, the domestic travel agent has to collect the TCS right up front because it's an INR transaction. Whereas if the customer books on a global travel agent, then most likely because it's a forex transaction, he has to pay only the initial amount and the TCS levy happens subsequently by his credit card issuing bank. So there's a little bit of a price difference. For instance, if you are booking a 100-dollar equivalent overseas travel service, the customer would see an overall amount of 120 dollars being collected by the domestic travel agent, versus seeing only 100 dollars being collected when booking with a global travel agent, because the remaining 20 dollars would be subsequently collected by his credit card issuing bank. It's just the upfront that creates a little bit of a difference when booking with Indian travel agents versus overseas travel agents. It's hoping that if the RBI can come out with some clarification so that this upfront differentiation between domestic or overseas service providers can be avoided, because otherwise this can lead to shift of business from the Indian travel agents to the overseas travel agencies.

It's not really an additional charge, it's just a cash flow issue. I think it's important to educate the customers that it's going to come in as a credit almost immediately in their respective quarterly returns or in the 26AS. They can see the credit coming in and avail that credit, and accordingly adjust it against their advance tax payments. Therefore it is not really an additional cost, it's just an upfront amount to be paid which can be recovered via the tax credit.