Request for clarification & rationalization of provisions of TCS on sale of overseas tour program package u/s.206C(1G)(b) of the Income Tax Act, 1961
5th October, 2021
1. Smt. Nirmala Sitharaman,
Hon’ble Finance Minister,
Ministry of Finance,
North Block, New Delhi – 110 001.
2. Shri Ajay Bhushan Pandey
Hon’ble Revenue Secretary,
Department of Revenue,
North Block, New Delhi – 110 001
3. Shri Jagannath Bidyadhar Mohapatra
Central Board of Direct Taxes,
North Block, Secretariat Building
New Delhi – 110 001
Respected Madam / Sirs,
Sub: Request for clarification & rationalization of provisions of TCS on sale of overseas tour program package u/s.206C(1G)(b) of the Income Tax Act, 1961
Section 206C(1G)(b) of the Income Tax Act, 1961 applicable w.e.f 01/10/2020, is as under-
“Every person being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package, shall at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier, collect from the buyer, a sum equal to five per cent of such amount as income-tax.
Provided also that the provisions of this sub-section shall not apply, if the buyer is,—
(i) liable to deduct tax at source under any other provision of this Act and has deducted such amount;
(ii) the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
Explanation: for the purposes of this sub-section —
‘overseas tour programme package’ means any tour package which offers visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. “
2. Difficulties in compliance of TCS provisions
The above sub-section don’t support the intent of Government of Ease of doing business and Tour operators are facing difficulties in compliance to the TCS provisions as under-
a) No threshold limit of Sale of Overseas Tour Package has been provided, thus TCS provisions are applicable for even economical tour packages.
b) No exemption from compliance has been provided to MSME tour operators, making it difficult for small tour operators to comply with complicated provisions.
c) Very high rate of TCS @5% is being collected along with GST @ 5% on sale of overseas tour package, resulting into overall increase of tour package cost by 10%. Tourism is one of the hardest hit sectors by the Covid-19 pandemic and no relief from TCS & GST provisions has been provided till date to boost the morale of MSME tour operators as well as tourists.
d) There is no clarification regarding applicability of TCS provisions on B2B transactions, i.e. when tour package is sold by one tour operator to another. Section nowhere says that the TCS is required to be collected from the “person who is going on overseas tour.” TCS has to be collected in B2B transactions as well because section defines applicability of TCS from buyer of Overseas Tour package. Margins of tour operators are already low and applicability of provisions further leads to blockage of funds to the tune of 5% of aggregate B2B transactions.
e) There is no provision for immediate refund/adjustment of the amount of TCS in case tour package is subsequently cancelled and collectee has to wait till the processing of Income Tax Return by the Income Tax Department.
f) Clarification is required regarding applicability of TCS provision in case entire tour package is not sold by tour operator, but only standalone booking is done for tourist i.e. booking of either of Hotel, airline ticket, payment of VISA fees or Travel Insurance.
g) ‘Travel agents’ books hotel, airline ticket, sightseeing, VISA fees payment, purchase foreign currency etc on behalf of traveller/tourist on pure agent basis. Cost of the above payments is reimbursed on actual basis along with small service charges in the form of facilitation fees is charged by such ‘Travel Agent’. All the bookings and payments are done by Travel Agent on the instructions of buyer and reimbursed on cost-to-cost basis. There are different interpretations & opinions by various tax professionals on the applicability of TCS provisions on Travel agents.
h) Whether there would be different view on applicability of TCS in case Travel Agent also gets referral commission from Airline or Hotel apart from tiny facilitation fees from traveller?
i) There is huge compliance cost for monthly deposit and quarterly return filing on MSME tour operators and further heavy late filing fees along with delayed deposit interest burden.
j) Whether TCS provisions are applicable in case Tour Package is sold by “Foreign Online Travel Company”, who don’t have permanent establishment in India and Indian buyer purchases tour online through website of such company?
Due to complicated TCS provisions and high cost of compliance, tour operators & travel agents across country are losing business to big giants of the Travel Industry i.e. Online Travel companies & foreign travel operators who have adequate infrastructure and low cost of operations. In view of above background, your honour should consider the above aspects to exempt the MSME tour operators from applicability of TCS provisions, simplify the provisions for ease of doing business and clarify the issues involved in the compliance of same.
Looking forward for your kind consideration to the request.
CA. Sagar Gambhir
FCA, DISA (ICAI), DIRM (ICAI)
Email – [email protected]