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NEW DELHI: The Indian Association of Tour Operators (IATO) has welcomed the Centre’s decision to withdraw the provision of levying 5% tax collection at source (TCS) on the sale of overseas tour packages to foreign tour operators.

Since October 2020, Indian tour operators were required to collect 5% TCS on billing to foreign tour operators or individual foreign travellers to India. The levy had earlier been withdrawn for individual foreign tourists.

Industry bodies had lobbied for scrapping the provision. This removal of tax will benefit both individual foreign tourists as well as foreign tour operators, and also make tour packages offered by Indian tour operators to foreigners a bit cheaper, providing some relief to the pandemic-ravaged sector.

A lot of foreigners book overseas tour packages for neighbouring countries like Bhutan, Nepal and Maldives through Indian tour operators. But since the levy, they preferred booking tours directly with tour operators in those countries.

Rajiv Mehra, president, IATO, said, “The impact of this notification is that both foreign individuals and FTOs (buyers) buying overseas tour packages from the Indian tour operators will be exempt from TCS provisions. It is not necessary that the foreign tourist should visit India for an onward journey to the neighbouring country. Secondly, the FTO or corporate entity established in a foreign country and not maintaining any permanent establishment or branch in India would also be exempted from TCS provisions."

He added that Indian tour operators were losing a lot of clients because of this tax, besides the government. was losing foreign exchange as the entire money was going to the other countries.

Earlier this year, the travel and tourism industry had set its sights on the Union Budget to hasten recovery. Among their demands was this tax exemption.

Meanwhile, budgetary allocation for the tourism ministry was slashed to 2,026.77 crore in 2021-22 from 2,500 crore in 2020-21.

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