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Travel agents cry foul on double taxation

The Travel Agents Association of India has shot off a letter to FM Chidambaram, drawing his attention to double taxation of airline tickets bought through travel agents, reports Gaurav Choudhury.

business Updated: Feb 04, 2008 22:40 IST
Gaurav Choudhury

Travel agents in India are crying foul over a service tax rule, which they feel results in taxing the tourists twice over.

The Travel Agents Association of India has shot off a letter to Finance Minister P Chidambaram, drawing his attention to double taxation of airline tickets bought through travel agents.

First, the government levies service tax when the airline issues the ticket and then the commissions charged by the travel agent to the airline are also taxed. Both are passed on to the consumer, resulting in higher fares.

The association’s president, C Venkateshwara Prasad, pointed out that this anomaly is resulting in passengers doling out Rs. 61 extra on a ticket worth Rs 10,000 on the domestic route. For international travelers, the pinch is even stronger – they have to pay Rs. 123 extra on a ticket.

The extra charges arising from the tax anomaly may appear small, but they make a difference in an environment of cutthroat competition, Prasad said.

“We have sought an amendment in Section 65 of Finance Act 1994. It is only logical that service tax should be collected at the hotel or the airline and not also at the agents’ level,” said Prasad.

About 40 per cent of the airline bookings in India are done through travel agents. There are over 30,000 travel agents in the country and about 3,000 of them are accredited to the International Air Travel Association.

“The higher service tax incidence is resulting in eroding margins as clients prefer to book tickets directly from the airline as it comes cheaper,” said Sanjay Narula of Apex Tours and Travels.

Airlines pay agents a commission of 5 per cent of the fare.

“This tax is hurting us badly. The commission charges we receive are very low and a low client base is affecting our revenues,” said Jay Rekhy of Inter-Skyline, a Delhi-based tour operator.