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25.08.2023 - 13:14 / skift.com / Peden Doma Bhutia
In the past five months in India, there have been four announcements from the government regarding taxes for international tour packages — each completely different, none clearly stated.
It’s wreaking havoc on India’s travel industry as the country is emerging as a major source of outbound travel.
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The flip-flops have left the industry frustrated and confused. Skift spoke to several India-based travel companies to better understand the concern of the new tax policy.
Mahendra Vakharia, the managing director of Pathfinders Holidays, described the frequent changes as “amateurish” and “poorly executed.”
The complexity of the travel and tour industry, with its various booking and payment modes, makes it difficult to impose a blanket 20% tax, said Vakharia.
Isha Goyal, CEO of STIC Travel Group, considers these policy changes an inconvenience for small and medium-sized travel companies trying to expand their outbound travel business.
The ambiguity in tax policies has made it challenging for businesses to effectively plan their operations, according to Rikant Pittie, co-founder of EaseMyTrip. However, Pittie is relieved that with every new development, the policies are being relaxed.
It’s not just about the inconvenience: The taxes put Indian travel companies at a disadvantage to international operators.
The proposed increased tax on overseas travel deters holiday-goers, family visitors, and entrepreneurs from traveling. For individuals relying on monthly income, the 20% tax credit, which they can later claim in their tax return given at the end of the year, does little to alleviate the immediate cash flow challenges.
Furthermore, the unequal imposition of taxes affects Indian travel companies in another way. By implementing the tax for Indian tour operators, travel agents and overseas credit card payments, the policy encourages travelers to book with international companies.
“Such a regressive step goes against the Make In India policy,” said Vakharia, a reference to the prime minister’s Make In India mantra. “It seems illogical to impose a 20% tax on international travel when luxury cars attract only a 1% tax.”
Goyal said it not only hurts small local entrepreneurs and businesses, but also leads to potential revenue losses as overseas bookings increase through international credit cards and prepaid foreign exchange cards.
Rohan Mittal, chief financial officer of Yatra Online, thinks the government should ensure fair competition between Indian travel companies and international aggregators by bringing foreign companies under the same tax rules.
Vishal Suri, the managing director of SOTC Travel, supports this idea and suggests implementing revised credit card guidelines to ensure
More Indians are taking personal loans to travel and meet vacation-related expenses, according to Madhavan Menon, executive chairman of Thomas Cook India.
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