Whether B2B transactions of tour operator also liable for TCS?
Whether B2B transactions are also covered by the Tax Collection at Source (TCS) provision as introduced recently by way of section 206C(1G) by the Union Budget – 2020? Whether the TCS will be applicable even if the package is of small amount say of Rs. 17,999/- for Thailand Tour? I have read somewhere that the tour package above Rs. 7 Lakh only is liable for TCS and not of smaller amount. Please advice.
It’s an interesting query indeed. Before coming to an opinion, one need to read the new section 206C (1G) as proposed by the Finance Bill -2020, which reads as under:
Section 206C ‘(1G) Every person,–
(a) being an authorized dealer, who receives an amount, or an aggregate of amounts, of seven Lakh rupees or more in a financial year for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalized Remittance Scheme of the Reserve Bank of India;
(b) Being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,
Provided 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,–
(i) “authorized dealer” means a person authorized by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security;
(ii) “overseas tour program 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.
There are following important points that need to be noted from above section:
- There is no threshold limit for TCS U/s 206C (1G) of the Income Tax Act – 1961. So, even a package of Rs. 17,999/- or even smaller amount will also be liable for TCS. The threshold limit of Rs. 7 Lakh is applicable for remittance under LRS scheme and not applicable for tour operator.
- There is no exclusion of B2B Transactions from the purview of TCS provisions U/s 206C (1G).
- Even B2B transactions will be subject to TCS U/s 206C (1G). However, there is just one exception. If the B2B transaction is liable for TDS then the TCS provision U/s 206C (1G) will not be applicable. For example, X Travel is a retailer of tour packages which is purchased by it from Y Travels and if X travel is doing TDS while making the payment to Y travels u/s 194C then the TCS provisions may not be applicable in such cases.
(It may be noted that section 19C is applicable if there is a “works” contract and work contract includes “carriage of goods or passengers by any mode of transport other than by railways;” and “catering” which may be liable for TCS).
If the transactions by X travels & Y travels is without TDS U/s 194C then there will be two occasion of TCS. First, TCS will be applicable on payment by X travels to Y Travels. Second, by customer of X Travels on payment to X Travels