Whether a lower rate of TCS is applicable on the tour operator & foreign remittances?

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Whether a lower rate of TCS is applicable on the tour operator & foreign remittances?

Opinion:

The tour & travel industries started showing signs of business and the business is starting to pick up. The common question is now about the applicability of TCS on Tour operator as introduced by the Finance Act -2020.

Government has reduced the rate of TDS/TCS due to prevailing Covid-19 so to ensure better liquidity in economy.

The press release issued by the Ministry of Finance was as under:

Ministry of Finance

Reduction in rate of Tax Deduction at Source (TDS) & Tax Collection at Source (TCS)

13 MAY 2020

In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, the rates of Tax Deduction at Source (TDS) for  the following non-salaried specified payments made to residents has been reduced by 25% for the period from 14th  May, 2020  to 31st March, 2021:-

TDS Rate Chart for FY 2020-21

[Prior to add After 14th May 2020

S. No Section of the Income-tax Act Nature of Payment Existing Rate of TDS Reduced rate from 14/05/2020 to 31/03/2021
1 193 Interest on Securities 10% 7.5%
2 194 Dividend 10% 7.5%
3 194A Interest other than interest on securities 10% 7.5%
4 194C Payment of Contractors and sub-contractors 1% (individual/HUF)

2% (others)

0.75% (individual/HUF)

1.5% (others)

5 194D Insurance Commission 5% 3.75%
6 194DA Payment in respect of life insurance policy 5% 3.75%
7 194EE Payments in respect of deposits under National Savings Scheme 10% 7.5%
8 194F Payments on account of re-purchase of Units by Mutual Funds or UTI 20% 15%
9 194G Commission, prize etc., on sale of lottery tickets 5% 3.75%
10 194H Commission or brokerage 5% 3.75%
11 194-I(a) Rent for plant and machinery 2% 1.5%
12 194-I(b) Rent for immovable property 10% 7.5%
13 194-IA Payment for acquisition of immovable property 1% 0.75%
14 194-IB Payment of rent by individual or HUF 5% 3.75%
15 194-IC Payment for Joint Development Agreements 10% 7.5%
16 194J Fee for Professional or Technical Services (FTS), Royalty, etc. 2% (FTS, certain royalties, call centre)

10% (others)

1.5% (FTS, certain royalties, call centre)

7.5% (others)

17 194K Payment of dividend by Mutual Funds 10% 7.5%
18 194LA Payment of Compensation on acquisition of immovable property 10% 7.5%
19 194LBA(1) Payment of income by Business trust 10% 7.5%
20 194LBB(i) Payment of income by Investment fund 10% 7.5%
21 194LBC(1) Income by securitisation trust 25% (Individual/HUF)

30% (Others)

18.75% (Individual/HUF)

22.5% (Others)

22 194M Payment to commission, brokerage etc. by Individual and HUF 5% 3.75%
23 194-O TDS on e-commerce participants 1%

(w.e.f. 1.10.2020)

0.75%
  1. Further, the rate of Tax Collection at Source (TCS)for the following specified receipts has also been reduced by 25% for the period from 14th May, 2020  to 31stMarch, 2021:-

TCS Rate Chart for FY 2020-21 Pre & Post 14th May 2020

S. No Section of the Income-tax Act Nature of Receipts Existing Rate of TCS Reduced rate from 14/05/2020 to 31/03/2021
1 206C(1) Sale of
(a) Tendu Leaves 5% 3.75%
(b)Timber obtained under a forest lease 2.5% 1.875%
(c) timber obtained by any other mode 2.5% 1.875%
(d) Any other forest produce not being timber/Tendu leaves 2.5% 1.875%
(e) scrap 1% 0.75%
(f) Minerals, being coal or lignite or iron ore 1% 0.75%
2 206C(1C) Grant of license, lease, etc. of

(a) Parking lot

2% 1.5%
(b) Toll Plaza 2% 1.5%
(c) Mining and quarrying 2% 1.5%
3 206C(1F) Sale of motor vehicle above 10 lakhs 1% 0.75%
4 206C(1H) Sale of any other goods 0.1%

(w.e.f 01.10.2020)

0.075%
  1. Therefore, TDS on the amount paid or credited during the period from 14thMay, 2020 to 31stMarch, 2021 shall be deducted at the reduced rates specified in the table in para 1 above. Similarly, the tax on the amount received or debited during the period from 14th May, 2020  to 31st March, 2021 shall be collected at the reduced rates specified in the table in para 2 above.
  2. It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/AadhaarFor example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.
  3. Legislative amendments in this regard shall be proposed in due course.

It may be noted that the chart incorporated by the ministry of finance is elaborated one and cover the applicable on all categories of payment. However, two categories of person are not given the benefit of lower TCS rates. This new categories of persons are

(a) An authorised dealer, who receives an amount, for remittance out of India from a buyer under the Liberalised Remittance Scheme of the Reserve Bank of India;

(b) A seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,

It may be carefully noted that the benefit of lower rate of TCS is not available to only section 206C(1G) whereas section 206C(1F) & 206C(1H) are duly covered. It appears to be the intentional drop by the Government. Though section 206C(1G) & Section 206C(1H) were introduced simultaneously by the Finance Act-2020, only section 206C(1H) is given the benefit of lower concessional TCS rate.

Tour Operator & foregin remittance under LRS by authorised dealer is not liable for concessional TCS rate benefit and required to do the TCS at normal rate.

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:

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