Travel portals seek clarity on TCS provision under GST

India’s online travel providers such as MakeMyTrip, Yatra, Cleartrip and others are in a quandary over the new tax collected at source (TCS) under the goods and services tax (GST). TCS provision mandates all e-commerce operators, except those acting as agents, to deduct tax.

All such portals, which have online as well as offline business, are also agents of International Air Transport Association (IATA). A circular issued in September has created some confusion prompting the industry to seek a clarification from the government.

“It is not a marketplace. We carry full transaction. We are IATA agents and should not fall under the ambit of TCS. We are seeking a clarification from the government,” said Pravin Chugh, president, Travel Agents Federation of India (TAFI). “We could also approach the courts if we do not get a favourable clarification.” TAFI represents more than 600 travel service providers. The GST law provides that an ecommerce operator, other than an agent, will need to withhold tax on all payments made to suppliers and deposit the tax collected with the government.

IATA agents earn a commission on sales and fulfil the classic definition of agent, according to the industry. However, a clarification issued by government in form of frequently asked questions states that they are ecommerce operators who have come under the ambit of TCS.

The situation is further compounded where sub agents purchase tickets from other online IATA agents. There is ambiguity in the definition of an agent, who is exempted from collecting tax at source in case of supply through an ecommerce operator.

“A classic case is where an IATA agent is also an online portal and is selling tickets on behalf of the airline. It is imperative that it be clarified that such agents do not require collecting tax at source,” said Bipin Sapra, partner, EY.

The TCS provision mandates notified entities to deduct up to 0.5 per cent state GST and 0.5 per cent central GST on intrastate supplies of over Rs 2.5 lakh.

The TCS and tax deducted at source provisions are aimed at curbing tax evasion as these leave an audit trail. Though the tax rate mentioned in the provision is up to 1 per cent , the government has pegged it lower at 0.5 per cent . These provisions were to be implemented from July 1, 2017 with the GST rollout, but GST Council deferred it by a year till June 30, 2018. It was again put off till September 30.