18th March 2020

Smt. Nirmala Sitharaman

Minister for Finance

Government of India 

North Block

New Delhi-110001

Hon’ble Minister Madam,

Sub:  Request for roll back of amendment to Section 206C proposed vide Finance Bill, 2020 obligating tour operators to collect at source (TCS) from a person purchasing overseas tour programme package

The Indian Association of Tour Operators (IATO) is the National Apex Body of Tour Operators with membership of over 1600 across the country. Our membership consists of the nation’s inbound tour operators, travel agents, hotel chains, airlines, state government tourism departments/state tourism development corporations, press and media and other stakeholders in the tourism & hospitality industry. The Membership of IATO controls over 90% of all inbound tourism into India. 

We refer to the proposed amendment to section 206C of the Income-tax Act, 1961 (‘Act’) by way of insertion of clause (b) of sub-section (1G), which provides that a seller of an overseas tour program package shall collect tax at source at a rate of 5% from the buyer being the person who purchases such package. It has also been proposed that in the absence of a Permanent Account Number (‘PAN’) of the buyer, tax at twice the specified rate (i.e. 10%) shall be collected.

Explanation (ii) to sub-section (1G) defines an “overseas tour program package” to mean “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.”

While the intent of the aforesaid provision is to facilitate reporting of the transactions and mitigate tax evasion, however, applying the aforesaid provisions to Indian tour operators would lead to a disparity by giving an advantage to foreign tour operators/ travel website/ agents over domestic tour operators/ agents.

In this regard, we wish to submit as under:

Unwarranted advantage to the foreign tour operators/ travel agents resulting in loss of business and revenue to domestic tour operator/ travel agents

Tour operators/ Travel agents are persons facilitating provision of services between the actual service providers providing travel services (viz. airlines, railways, bus operators, cab operators, hotel owners) and the service recipients (viz. passengers intending to avail the travel services). A customer can book an overseas tour package or even a standalone component of such tour through foreign online travel agents and number of other online travel websites who have no physical presence in India. These bookings can be done simply using credit/ debit cards, foreign currency in cash and other available payment modes.

As per the proposed amendment, Indian tour operators/ travel agents would be obligated to collect tax at source, resulting in a higher cash outflow for the customers.  Since a customer can easily book an overseas tour package directly with the foreign tour operator/ travel agency, he is likely to do so instead of booking the tour package through an Indian tour operator/ travel agent, to avoid this additional 5% cash out flow towards tax collected at source (though such tax collected at source would subsequently be available as a credit/ refund to the customer).

The aforesaid provision, therefore, would certainly give a price advantage to the foreign tour operators/ travel website/ agents/ suppliers and would result in significant loss of business for the Indian tour operators.

In addition to loss of business and revenue from residents travelling abroad, the aforesaid provision would also result in loss of business and revenue for the Indian tour operators from sale of overseas tour packages to non-residents.

Under the proposed provision, Indian tour operators/ travel agents would be required to collect tax at source at the rate of 5% from the buyers of overseas tour package, irrespective of whether such buyer is a resident of India or not.

Tour packages for neighbouring countries (such as Nepal, Bhutan, etc.) are many times organized by Indian tour operators/ travel agents for foreign tour operators and/ or non-resident tourists. The proposed section, as it is presently worded, provides no exception for non-applicability of the provision to overseas tour packages sold by an Indian tour operator to foreign tour operator/ tourists, who are not resident of India. Furthermore, where the purchaser does not have a PAN in India (which would be the case in most cases), the Indian tour operators would be required to collect tax at source at a rate of 5 %.  The said tax collected at source would, therefore, become a cost of such foreign tour operators/ tourists since they would neither have a PAN nor any requirement for filing a return in India in the absence of any taxable income in India and therefore there will be no adjustment of refund. Such additional cost for the buyers would result in a loss of business for the Indian tour operators who are already facing stiff competition from the tour operators/ travel agents in neighbouring countries, since the non-resident buyers will prefer to book the tour packages with the tour operators/ travel agents outside India. This will also result in losing foreign exchange for the country in the form of added value.  

Negative impact on employment generation and loss of tax revenue to the Government exchequer

Tourism Industry in India is one of the key growth drivers for the economy and has also played a pivotal role in employment generation in the country.

Loss of business/ revenue for the Indian tour operators on account of migration of buyers availing overseas tour packages to foreign tour operators (instead of buying such package from the Indian tour operators) and also potential reduction of the people travelling outside India due to increased cash outflow from overseas tours, may result in closure of business for a larger number of Indian tour operators/ travel agents and thus, result in unemployment of people employed by them. This would, without any doubt, have a negative impact on the economy as a whole.

It may also be noted that owing to potential reduction of number of travelers travelling to overseas destinations (due to increased cost of the tour packages), bilateral tourism programs/ projects between India and other countries may also be impacted resulting in reduction of overseas travelers travelling to India. This would further impact the earnings and foreign exchange inflows in India.

Besides, the Industry has also been contributing to the Government exchequer in the form of GST deposited on tour packages sold by the Indian tour operators.

Loss of business/ revenue to the Indian tour operators and migration of the buyers to foreign tour operators/ travel agents, who are not subject to GST levy in India, would also have a significant impact on GST collections. Therefore, besides resulting in financial loss to the Indian tour operators, application of aforementioned TCS provision would also result in GST revenue loss to the Government exchequer.

Details with respect to Indian Residents Travelling Abroad are already collected

The proposed amendment has been introduced with an intent to facilitate tracking of transactions and check tax evasion, if any. In this regard, we wish to bring to your kind attention the seventh proviso to sub-section 1 of section 139 of the Act provides that an individual, who has incurred an amount exceeding 2 lacs for himself or any other person for travel to a foreign country, would be required to file its income- tax return in India.

Thus, an individual, who has incurred expenditure on foreign travel exceeding the prescribed limit, would have a PAN and would also be filing its income- tax return in India and hence, such transactions would already be reported to the income-tax authorities. Further, as tour operators are covered under GST, the income-tax authorities can use the data collected through GST filings.

Alternatively, the Indian tour operators may be asked to file annual information returns to the income-tax authorities instead of imposing an obligation on the tour operators to collect tax at source. The annual information may capture the PAN of the customers and the amount paid by them to the tour operators. This mechanism will ensure that the tax authorities have relevant information to achieve the policy goal without negatively impacting the Industry.

It is, therefore, respectfully submitted that the aforesaid provision should be withdrawn to allay the fear of loss of business opportunities and job loss for Indian tour operators and GST loss to the exchequer.

We shall be pleased to answer any questions that you may have or provide any clarifications that you may require in this regard.

Yours sincerely,



Pronab Sarkar


(M) 9811102111