Overseas tourists may get tax refunds on goods purchased in India

In a bid to attract foreign travellers to India and encourage them to purchase more from the country, the tourism and exports industries are urging the government to offer tax refunds to overseas tourists taking goods outside India, as per a report in The Economic Times.

The industry associations have taken up the issue ahead of the Union Budget 2023-24. They have pointed out that Section 15 of the IGST Act, 2017 provides for tax refund for tourists. However, the scheme is yet to be implemented.

The scheme had been kept on hold when GST had been rolled out owing to the “IT infrastructure needed to be enabled for its last-mile implementation,” but the industries body believes that it is now time for the scheme to be rolled out.

"It is in our budget recommendations and we have mentioned that this needs to be made available for all foreign tourists. The basic infrastructure needs to be worked out. Our proposal is very simple - the GST on shopping applied for foreign tourists should be given back to them. It's there in the GST law and should be implemented now," president of the Indian Association of Tour Operators Rajiv Mehra wrote to the finance ministry.

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Emphasising the need for the government to roll out a scheme on the line of tax rebates to foreign travellers, Ajay Sahai, Director General, Federation of Indian Export Organisations added that several countries like Singapore, China, Thailand and Dubai have already introduced similar schemes for tourists.

"They are benefiting from increased sales and exports of local goods to international visitors due to the added incentive of tax refunds. The merchants in many of these markets compete directly with Indian retailers across a broad cross-section of goods offered, such as jewellery, textiles and lifestyle products,” he added.

Acknowledging that the implementation of this practice will require a certain level of coordination, Bipin Sapra, partner with EY India, called this a “long-standing demand of the industry which will boot most of our labour-intensive export like textiles, leather, gems and tea" and said that this could be achieved through a “central online system to expedite tax refunds.”