International airlines are revoking dealerships over tax-related dues

International airlines including Delta, Singapore Airlines, Thai Airways, British Airways and Air France have started revoking the dealership of travel agents from across the country for non-payment of tax-related dues.

The international carriers have also threatened to freeze the travel agents' bank guarantee.

While the contentious issue of payment of tax deducted at source (TDS) has been hanging for over two years now, the airlines have resorted to such a drastic action at the time of peak business season for the travel agents.

At this juncture, the travel agents are forced to cough up the money as failing which they will not be allowed to issue tickets on behalf of the airlines.

Airlines had in the past issued notices to the travel agents asking them to pay the tax on the difference between published fare (the fare printed on an air ticket) and the net fare (the actual discounted fare paid by a passenger).

While the two different fare categories co-existed in the market, fierce competition forced the travel agents to offer a large chunk of the discount to the customers.

Even though the discount was passed on to the customers, the travel agents have been directed to pay tax on the discount component.

The airlines had in the first stage made payments to income tax authority. They are now recovering the money from the agents.

A senior executive of a leading international carrier said, "The travel agents owe us money and it is only obvious that they will have to pay. At the same time, we would also ensure that our business partner have a sound financial position. The TDS issue is an internal matter between the airlines and the travel agents and need to be sorted out at the earliest."

He refused to divulge further details on the issue.

A senior member of the Travel Agents' Association of India (TAAI) "" the apex body of travel agents in the country "" said: "Most of us are paying the TDS amount because we cannot afford to go out of business during the peak time. We are making money after a long drawn lull in the industry. So, this is the best time for the airlines to extract money out of us."

Sources close to the development also said that the move is as per the terms agreed to in a meeting between TAAI, Travel Agents Federation of India (TAFI) and the Board of Airline Representatives-India (BAR(I)) in March 2002.

The airlines, in the past, had had several meetings with the Central Board of Direct Taxes (CBDT) on the issue. However, with no positive response from the tax authorities, the airlines were forced to pay the disputed TDS amount.