September 29, 2022

Big relief for Indian tour operators when tax removed

The Indian Association of Tour Operators (IATO) has expressed sincere gratitude to the Government of India for abolishing the levy of withholding tax (TCS) on the sale of overseas tour packages for foreign tourists who book trips through through tour operators located in India.

According to Mr. Rajiv Mehra, President of the Indian Association of Tour Operators: “This decision is a great relief to the entire travel and tourism fraternity as it was not logical to collect tax at source from foreign tour operators/foreign tourists as they are.not residents of India.They do not hold any Indian PAN card and do not pay any income tax and therefore are not subject to the Indian Income Tax Act income. Therefore, they have no possibility of claiming a refund of the TCS levy. These people are subject to tax in their country of origin. It was therefore necessary that the provisions of the TCS not be not applicable to persons/companies that are Indian residents/located outside India.

Collection of tax at source is a tax which is due by the seller, but which is collected from the buyer.

“The Association was concerned that in case TCS is collected from non-resident buyers such as FTOs, foreign citizens/individual tourists, Indian tour operators would lose their business as non-resident buyers would go directly to tour operators based in Nepal, Bhutan, Sri Lanka, Maldives, etc. and buy the overseas tour package from those tour operators who directly ignore Indian tour operators, resulting in loss of business for Indian tour operators and part of foreign currency The Association strongly recommended that the provisions of the TCS be amended to not apply to the sale of overseas tour packages to a class of non-resident/FTO buyers for packages outside Indian Territory.

“This issue was also raised personally with the Honorable Minister of Finance, Mrs. Nirmala Sitharaman, when we met her in her office on July 16, 2021, along with other matters, and the Honorable Minister of Finance understood our point of view and ensured that the matter was looked into positively.The Ministry of Tourism also supported us and collaborated strongly with the Ministry of Finance.

“We thank the Honorable Minister of Finance, the Ministry of Finance and the Ministry of Tourism for understanding our point of view and for withdrawing the collection of withholding tax (TCS) on the sale of organized tours abroad for foreign tourists booked through tour operators located in India”.