The Travel Agents' Association of India (TAAI) is planning to initiate legal proceedings against international airlines and the Central Board of Direct Taxes (CBDT) over tax deduction at source (TDS) on the published fares on international air tickets.
The agents are contending that their income is only the 7 per cent commission of the published fares. Currently, they are also having to pay taxes on the difference between the published fares and the net fares, which is the discount component. Typically, the net fares are much lower than the published fares, due to seasonal discounts offered by various airlines.
"Why should we pay a tax on the entire difference between the published fare and the net fare, which is the discount component that is passed on to the end consumer. The agents already pay a tax on the 7 per cent standard commission that they are entitled to on the published fare," a senior TAAI official said.
"We are being forced to pay a tax on an incentive which we do not retain. This is absolutely illogical. We are left with no option but to seek judicial guidance to resolve the issue. Within the next 3-4 days, we are planning to file a case against the airlines as well as against the Indian tax authority."
The published fare is the bilaterally approved fare between the official airlines of two countries.
According to sources in international airlines, the board of airlines representatives (BAR India) had sought a clarification from the CBDT as to what was the exact component which is tax liable. However, it is understood that the local tax authorities had interpreted and conveyed to some of the international airlines that the entire difference between the published fare and the net fare attracts TDS.
A TDS of 10.2 per cent was imposed on travel agents with effect from June 2001, following which the agents have made several presentations to the tax authorities. The tax authorities then granted some relaxation to the agents according to which the range was reduced to 2 per cent for the private and public limited travel agencies.
