Insiders reveal that high-level discussions are ongoing regarding the potential implementation of a cess, tax, or surcharge on outbound international travel. However, a definitive conclusion has not yet been reached.
This proposal surfaces as India faces the spillover effects of increasing geopolitical tensions in West Asia, which have caused fluctuations in global crude oil prices, along with elevated shipping and freight costs, ultimately driving up overall import expenses.
The suggested measure could serve a dual function — providing extra revenue for the government while simultaneously discouraging non-essential trips abroad and aiding in the conservation of foreign exchange reserves.
These deliberations carry weight considering Prime Minister Narendra Modi’s recent comments during an address in Hyderabad, where he encouraged citizens and enterprises to practice austerity in light of global uncertainties. He urged individuals to limit unnecessary foreign travel and to prioritize careful spending, reflecting the government’s escalating concerns regarding external vulnerabilities and foreign exchange outflows.
Sources noted that should the proposed levy receive approval, it would likely be a temporary measure, potentially lasting around one year. The specific framework of the charge — whether as a cess, surcharge, or additional tax — is still under review.
Critically, it was mentioned that any revenue generated from this levy would be directed solely to the Centre and would not be included in the divisible tax pool allocated to states.
“This allows the Union government greater fiscal flexibility during a time when additional resources may be crucial to manage increasing subsidy costs and heightened import expenses associated with elevated crude prices,” sources explained.
Experts in the industry have stated that should this move be executed, it could greatly affect India’s flourishing outbound tourism market, which has seen significant growth since the pandemic. Costs for international vacation packages, overseas educational travel, premium leisure trips, and even business travel could rise significantly.
Players in the travel and aviation sectors are likely to keep a close watch on the details of this proposal, particularly if the levy is tied to ticket prices, travel packages, or foreign exchange spending under the Liberalised Remittance Scheme (LRS).
It’s worth noting that the government had previously moved to ease the tax burden associated with foreign travel by adjusting the Tax Collected at Source (TCS) rules within the LRS.
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In the Union Budget 2025, the government streamlined TCS provisions by raising exemption thresholds and alleviating compliance issues for overseas spending, particularly related to education and specific travel categories.
In this context, the new proposal to introduce a temporary cess, tax, or surcharge on foreign travel represents a notable policy shift driven by current geopolitical and fiscal challenges.
The ongoing discussions also showcase the government’s broader strategy to brace for an extended period of global instability as the conflict in West Asia threatens to disrupt energy markets and global supply chains.
The Finance Ministry has yet to respond to inquiries from CNBC-TV18 regarding this issue. For the moment, the proposal is still on the table, and it remains uncertain whether the government will ultimately move forward with the levy.
