Relief for domestic tour operators selling packages to non residents visiting In



The government on Thursday said domestic tour operators will not be required to collect tax on the sale of overseas tour packages to non-residents visiting India.

The Central Board of Direct Taxes (CBDT) relaxed the provisions of Section 206C(1G) of the Income-tax Act, 1961, which deals with tax collected at source (TCS), for non-residents.

While domestic tour operators are required to collect 5% tax on the sale of overseas tour packages to non-residents having permanent account numbers (PAN), those without a PAN were taxed at a higher rate of 10%.

The tourism industry made several representations before the government citing issues related to tax collections, considering that most non-residents did not have a PAN and could not file income tax returns to 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 of 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,” CBDT said.

Experts said that the move will encourage travel bookings from India as the government has exempted domestic tour operators from collecting taxes from non-residents for booking tickets from India.

“The purpose (of the rule) was to collect information and monitor tax compliances of high spending individuals.

However, the way the provisions were drafted, tour operators were even required to collect taxes from non-residents, who are otherwise not taxable in India, at the time of booking their return tickets. This is a welcome step by CBDT and it will encourage travel bookings from the country,” said Neeraj Agarwala, partner, Nangia Andersen LLP.  

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