TCS withdrawal to boost tourism

With a major thrust towards boosting travel in India, the Indian government has announced that domestic tour operators will no longer be required to collect tax on overseas vacation packages sold to non-resident visitors. The travel fraternity applauds this move of the government.

Janice Alyosius

With the aim of boosting tourism in India, the Indian government has decided that domestic tour operators are no longer required to collect taxes on overseas tour packages sold to non-residents.

According to Section 206C (1G) of the Income-tax Act, 1961, a seller of an overseas tour package may collect tax from a buyer at a rate of 5 per cent of the package price.

Representations were received from domestic tour operators facing difficulties in collection of tax from non-resident individuals visiting India booking overseas tour package from such domestic tour operators. Since such persons may not have a PAN, tax is required to be collected at higher rates. Further, such non-residents may find it difficult to furnish their ITR and claim refunds.

In order to remove such difficulties, the Central Government, in exercise of powers conferred under section 206C(1G) of the Act, has specified that the provisions of the said section shall not apply to a buyer being an individual who is not a resident in India in terms of clause (1) and clause (1A) of section 6 of the Act and who is visiting India. Hence, a domestic tour operator is not required to collect tax on sale of overseas tour package to non-resident individuals visiting India.

Rajiv Mehra, President, IATO, said, “This decision is a big relief for the entire travel and tourism fraternity as it was not logical to collect tax at source from the Foreign Tour Operators/Foreign Tourists as they are not residents of India. They neither possess any Indian PAN card nor they pay any income tax and hence are not liable to the Indian Income Tax Law. Therefore, there is no scope for them of availing any refund from the Levy of TCS.  These persons are subject to taxation in their native country. It was, therefore, necessary that the provisions of TCS should not be made applicable to persons / companies who are Indian resident/located outside India.”

IATO apprehended that in case TCS is collected from non-resident buyers such as FTOs, individual foreign citizens/ tourists, the Indian Tour Operators will lose their business, as the non-resident buyers will directly approach the tour operators based in Nepal, Bhutan, Sri Lanka and Maldives and buy the overseas tour package from those tour operators directly skipping Indian Tour Operators, resulting in loss of business for the Indian Tour Operators and a portion of foreign exchange. The Association strongly recommended that the provisions of TCS should be amended not to be made applicable to sale of overseas tour package to non-resident class of buyers / FTOs for packages outside Indian territory.

He added, “We thank the Finance Minister, Ministry of Finance and Ministry of Tourism for understanding our view point and withdrawing Tax Collection at Source (TCS) on sale of overseas tour packages for foreign tourists booked through tour operators located in India.”

Riaz Munshi, President, OTOAI said, “We are truly delighted and relieved that the Government has withdrawn Tax Collection of Source (TCS) on sale of overseas tour packages for foreign tourists who book tour through tour operators located in India. This is a positive move and will certainly reduce the burden on Outbound Tour Operators, who are struggling to stand back on their feet.



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