Applicable at the rate of 5% on foreign remittances made through Liberalised Remittance Scheme (LRS) of RBI, Tax Collection at Source (TCS) has created apprehension among travel agents. Global Panorama Showcase (GPS), in association with TRAVTALK, Flyremit.com and GMJ, organised a brainstorming session to clear doubts of the travel trade.
According to CA Hari Das Bhat, Partner, GMJ & Co, levying TCS is government’s move to bring people travelling abroad under tax net. “Majority of queries received from travel fraternity are regarding confusion between TDS (Tax Deducted at Source) and TCS. A travel agent’s duty is to collect tax from overseas tour package (OTP) buyer and pay to the government. How you spend, how you remit it and what you do with your expenditure has got nothing to do with TCS; if anyone buys OTP from you, then over and above ticket and GST, you have to collect the TCS also like any other tax. You also need to collect GST from TCS also on invoice or advanced receipt, whichever is earlier. Whatever TCS you collect during the month, you have to pay the government before seven days of end of every month for all months except March, where you get extension of 30 days. Then you have to file quarterly returns within 15 days from end of the quarter and for March quarter there’s 45 days of time. Your duties and responses are simple, collect TCS and pay to the government in time. If you don’t do it in time, then there are penal provisions, interest provisions and per-day fine. One thing you have to be clear of, if somebody is deducting TDS on your bill, you need not collect the TCS. So, wherever TDS is applicable, TCS is not applicable. The government wants you to be part of the nation building exercise. Your responsibilities are immense,” he explained.
TCS is not an additional tax
Giving out an all-explainer presentation, Abdul Hadi Shaikh, Co-Founder, Fxkart.com & Flyremit.com, cleared most frequently-asked questions on TCS and presented a larger picture. “If people ask if TCS is an additional tax, no, it’s not correct. TCS is not an additional tax, it is an advance tax. Whether you are a business or a salaried person, you can claim this payment against your income as income tax. Any amount that needs to be remitted out of India under LRS code SO306 comes under new TCS law.”
Biggest nation building exercise
Terming TCS as probably the biggest nation-building exercise in the travel industry brought in by the government, Harmandeep Singh Anand, Managing Director, GPS, said that TCS will help the Indian travel industry become an organised sector. “We need to explain to our clients that TCS is not an additional cost, it is just an advance tax. TCS is the way forward. We will have the right people in the industry continuing in a right format,” Anand said.
Queries from trade
Q Who has to bear TCS?
For overseas travel, the individual travelling abroad has to bear TCS. Traveller or the person whose PAN is being used to remit money abroad has to pay TCS. For overseas education, the parent or the student has to pay TCS. When remitting, in addition to all documents, travel agent will give remittance company TCS challan and declaration.
Q Examples of payment liable for TCS?
Package tours bought from DMCs; stand-alone hotels, overseas (local) flights, sightseeing, food, attractions, etc., bought directly from overseas seller; foreign travel-related items bought but payment done in INR to local accounts.
Q What is TCS for education?
If self-funded education remittance, 5% TCS over `7 lakh remitted in FY and if loan taken, 0.5%.
Q Should TCS be added to the cost or be inclusive? How can customers be quoted?
TCS should be collected separately. If you do not collect separately, it will be your cost. Ideally, one should quote as the OTP price + GST + TCS.
Q If tour cost includes domestic and international portion, is the TCS applicable on total or only on international portion? Does TCS apply on total tour cost or only the forex component?
TCS is applicable on outbound tour packages only. When the package is sold including domestic portion, the TCS will be applicable on full package amount. Whether the seller of the OTP spends in forex or otherwise does not matter for TCS as applicable to travel agent. Better to bill both segments, domestic and international, separately.
Q If passenger pays by credit card directly to the hotel at the time of check-out, will the credit card company have to collect TCS? If agent buys services for his customers on an international website and pays by credit card, what is TCS position?
TCS is applicable when you bill for OTP and collect the same. If someone directly pays to the hotel via credit card, there is no liability of TCS on travel agent, who has arranged the booking. However, the bank will collect TCS on the same under LRS. The TCS will be applicable whether the agent pays for the same by credit card or through bank. All major credit card companies have come up with clarification that if an Indian credit card is used to pay for overseas travel services, then the credit card company will charge additional 5%. There may be an additional TCS processing fee also levied by the credit card company. Further, traveller will have to follow up with the credit card company for TCS certificate.
Q What documents are required from the customer for levying TCS?
Only the PAN card of the buyer of the OTP is required. It is suggested to keep the copy of PAN for record purposes.
Q Is TCS applicable on passenger purchase of currency and forex cards?
Yes, if the purpose of obtaining foreign currency or Forex card is declared as foreign travel.
Q If tour operator is a sub-agent of another tour operator, who is responsible for TCS? Who collects TCS?
The first person who sells overseas travel services to traveller (whose PAN is used for LRS) will have to collect and discharge TCS. Every subsequent movement of money in India will be: Invoice value + TCS payment challan (collected and paid by first travel agent).
Q Tour cost is collected in instalments, especially for M!CE business. For M!CE there are usually 3 payments, first advance invoice is raised, then pre-departure amount received, and final balance after tour is completed. At what stage is TCS payable?
At every stage TCS has to be discharged proportionately.
Q Cancellation of tours in the last minute happens frequently. How do we claim refund of TCS paid?
Traveller has to collect TCS refund in his income tax returns.