4^th April 2022,

To All Members.

Sub:   Withdrawal of  levy of Tax Collection at Source (TCS) on sale of overseas tour package for foreign tourists

Dear Friends,

As you are aware, for the last two years IATO has been pursuing with the Government to withdraw levy of tax collection at source (TCS) on sale of overseas tour packages for foreign tourists who book tours through our members / tour operators in India. The Association has represented at all forums that

(a)          the provisions of section 206C of I.T. Act cast an obligation on the Indian tour operator to collect 5% TCS from a buyer purchasing overseas tour package from the Indian tour operator;

(b)          since the expression “buyer” is not defined, the buyer can be any person including foreign citizen / individual or foreign tour operator company (FTO) incorporated outside India and does not maintain any branch / permanent establishment in India;

(c)          Indian tour operators receive orders from foreign citizens / tourists as well as from FTOs who buy overseas tour packages for the benefit of their clients being foreign citizens / tourists / individuals;

(d)          since the foreign tourists and the FTOs are not resident in India, they do not possess  any Indian PAN card nor they pay any income tax to the Indian Govt. and hence are not liable to the Indian Income Tax Law. Therefore, there is no scope for them to adjust the TCS from their native income tax liability nor seek refund of TCS from their respective tax authorities;

(e)          in view of the above background facts, the Association strongly advocated before the Ministry of Finance and the Ministry of Tourism that TCS provisions should not be made applicable to sale of overseas tour packages to non-resident buyers, both individuals and FTOs.

The matter was also taken up personally with the Hon’ble Finance Minister, Mrs. Nirmala Sitharaman, when we met her in her office on 16^th July 2021 to discuss the TCS and GST-related issues. The Hon’ble Finance Minister appreciated our grievances and assured to look into this matter positively.  

We are pleased to update you that with our aggressive follow up with the Ministries including TRU branch in the Ministry of Finance, the Govt. has now issued a notification No. 20/2022 dated 30.03.2022 conveying that the TCS provisions contained in sub-section (1G) of section 206C of I.T. Act shall not apply to an individual who is not a resident in India in terms of clause (1) and (1A) of section 6 of the Act, and who is visiting India. A copy of the notification issued by CBDT is enclosed. The notification is operative from 30.03.2022.  The CBDT has also issued a Press Release on 31.03.2022 clarifying that a domestic tour operator is not required to collect tax on sale of overseas tour package to non-resident individuals visiting India. A copy of the Press Release is also attached for the benefit of  the members. 

In view of the above notification / press release, you may stop charging TCS on sale of overseas tour packages to non-resident individuals visiting India. For more details, please consult your Chartered Accountant / Tax Consultant.  

We observe that the notification / press release is silent about the FTO / corporate entity who buy overseas tour package for travel of their clients / non-resident individuals. In these cases, the buyer is FTO and not the individuals. We are taking up the matter again with the concerned authority / CBDT for exempting TCS levy on sale of overseas tour packages by our members to FTOs / corporate bodies (buyers). We shall keep you updated as soon as the Govt.  grants relief on this account. 

Also we have observed that the notification states that the foreign tourists who are visiting India and then taking trip to neighbouring countries, TCS is exempted. However, it is silent if the foreign tour operators book the tour through Indian agents and visit the neighbouring countries directly without touching India. We are seeking clarification on this also.

With regards,

Rajiv Mehra

President

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Ministry of Finance

Central Government relaxes provisions of TCS under section 206C(1G) of the Income-tax Act, 1961 in respect of non-resident individuals visiting India

Posted On: 31 MAR 2022 3:49PM by PIB Delhi

Section 206C (1G) of the Income-tax Act, 1961 (“the Act”) provides for collection of tax by a seller of an overseas tour programme package from a buyer, being a person purchasing such package, at the rate of 5% of the amount of the package.

Representations were received from domestic tour operators who were facing difficulties in collection of tax from non-resident individuals visiting India who were 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.

Notification No. 20 of 2022 dated 30.03.2022 has also been issued and is available on www.incometaxindia.gov.in under the Notification Section.

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RM/KMN

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