TDS and TCS on OTAs Illogical and against natural justice: IAMAI

New Delhi

The Internet and Mobile Association of India has called upon the government for immediate removal of Tax Collected at Source (TCS) and the newly implemented Tax Deducted at Source (TDS) on grounds that such impositions are illogical and against natural justice, especially on Online Travel Aggregators. The present mandate of collecting TCS and TDS on all e-commerce aggregators is unjustified as all such forms of withholding taxation only passes the liability of tax collection and reporting on platforms who are not subject to the actual taxation and thereby undermines their intermediary rights.

The fallacy is compounded in case of the OTAs who have to bear the entire burden of such deductions on their own, leading to severe cash constraints. While OTAs are mandated to collect and deposit TCS at time of transaction, IATA registered airlines do not allow air travel agents to retain such amounts from their payment due to system difficulties and commercial reasons. Thus, OTAs now have to discharge TCS liabilities out of their pocket every month whereas airlines discharge GST liability when they receive the payment against the tickets sold.

For TDS, OTAs will have to bear the burden monthly while airlines will reimburse only once OTAs have raised TDS certificate, which is done quarterly.

All this leads to protracted reconciliations resulting in blockage of significant amount of funds of the OTAs, and considerable time and resources to reconcile accounts with both the GSTN and the airlines. 

TCS and TDS may be easy ways to shore up revenues on part of the government, but the global corona pandemic has shown that such short-sighted measures hurt the long-term health of the industries. With the online travel industry, online service ecommerce and online product commerce only delivering essentials for almost two months and with no clear pathway to full recovery in sight, IAMAI appeals to the government to repeal these extraneous impositions on the industry.