TAXAJ

GST on Travel Agents and Tour Operator Services

The travel and Tourism sector holds great strategic importance in the Indian economy, providing several socio-economic benefits. Apart from providing employment, income, foreign exchange for the country, the trade in the tourism sector has an economically positive impact on other associated industries such as food manufacturing, services, construction, etc. In addition, investments in infrastructural facilities such as transportation, accommodation, and other tourism-related services lead to the overall development of infrastructure in the economy.


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About This Plan

File your GST Compliances online through us. Get help with GST Filing Procedure, Eligibility and Documents required.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 3 to 5 working days.

Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Session with TAXAJ Expert
  • Understanding the requirements and needs
  • Filing of Returns and Compliances
Who Should Buy
  • Any business willing to do the mentioned business
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Upload documents on vault
    • Filing & Compliance as per the need
Documents Required

  1. Name, Contact Number and Email Id of Stakeholder.

  2. Self Attested PAN, Aadhar & Passport size photo of Stakeholder.

  3. Specimen Signatures of Stakeholder.

  4. Latest Electricity Bill/Landline Bill of Registered Office.

  5. NOC from owner of registered office. (If Owned)

  6. Rent Agreement from Landlord. (If Rented/Leased)

  7. Brief description of main business activities of the proposed Company.

  8. Cancelled Cheque in business name (After GST Approval)

All you need to know about Taxation of Travel Industry!

What is a Tour Operator?

“Tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

Two Major Business Models of Tour Operators

Tour Operator who works to provide Tour Package: Here total booking is done by the tour operator and the total fees charged shall include his margin. So the Tour Operator become service provider and in turn he receives services from various other counterparts like Airline Companies, Hotel, Local Taxi Operators, Restaurants, Embassy issuing visas.

Tour Operator who works just as a pure agent: The tour operator only facilitates the transaction and helps traveller to identify various suppliers as per their requirements and arrange for its booking. Payment flow goes straight away from actual traveller to end service provider and tour operator only charges for its service portion from traveller.


As per rule 33 of CGST Rules 2017 – Value of supply of services in case travel agent acts as Pure agent is, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.


Explanation - For the purposes of this rule, the expression “pure agent” means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

(c) does not use for his own interest such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

Hotel and Flight booking with Backend Commission- Here Tour operator does not charge any fees from the customer. He only facilitates the transaction and help traveller to identify various suppliers as per their requirements and arrange for its bookings. In turn the ultimate supplier pays commission for promotion and generating sales for them. It is mainly used in Hotel Booking & Flight Booking.

GST Applicability on Tour Operator Business

Every tour operator who has a turnover of more than Rs. Twenty lakhs in a fiscal year shall mandatorily obtain GST Registration. Furthermore, in the case of specific categories or particular states, the turnover limit is Rs. ten Lakhs. In simple words, tour operators in states:

  1. Arunachal Pradesh
  2. Assam
  3. Jammu & Kashmir
  4. Manipur
  5. Meghalaya
  6. Mizoram
  7. Nagaland
  8. Sikkim
  9. Tripura
  10. Himachal Pradesh
  11. Uttarakhand

Will have to obtain GST Registration and do GST Return Filing if their annual turnover is more than ten Lakhs Rupees.


However, it is essential to note that the threshold limit of turnover doesn’t apply in some cases. For example, the person making inter-state taxable supply. To illustrate, a person who, as an operator or otherwise, provides taxable supplies of goods or services, or perhaps both, on account of another taxable person, such as an air travel agency, must get GST Registration in India.

GST on Different Types of Income Sources of Tour Operators

A travel agency/agent may earn his/her commission from two major sources: the actual service provider (airlines, hotel, etc.), and the customer, and therefore, will produce two different invoices, as follows:


GST on Air Ticket Booking Services by Agents


18% GST will be levied on the commission income earned by air travel agents from airlines as well as on service charges and other charges collected from the passengers.

ITC is available on GST paid on commission/ service charge by an air travel agent.


Commission/incentive paid by the airline company

  1. In case of Domestic ticket – 5% of basic fair
  2. In case of International ticket – 10% of basic fair

GST on travel agents commission is charged at the rate of 18%.


The type of GST (CGST/IGST/SGST) to be imposed on the commission income of a travel agent depends on the location of supply.

  1. Customer located in India & registered under GST: location of the customer
  2. Customer located in India, not registered under GST, but address available: location of the customer
  3. Customer address not available: location of the agent


GST on the Sale of Tour Packages


There is 5% GST on tour operator services or company, without the benefit of ITC. 5% GST will be paid on the gross commission/fee charged from the customer.

From GST perspective, the tour packages can be divided into the following two categories:


1. Inbound Tour – tour of India for foreigner travelers

If the inbound tour fee is charged on Principal basis, GST shall be charged at the rate of 5% without ITC.

If the inbound tour fee is charged on Commission basis, GST shall be charged at the rate of 18% with ITC.


2. Outbound tour – Tour outside India for an Indian/foreigner

For outbound tour packages being offered to a person based in India, the location of supply will be the location of the service receiver.

For outbound tour package offered to a foreigner for visiting another foreign country, there is no GST charged on the commission received in convertible foreign currency.



GST on Travel Related Services like Visa, Passport, etc. by an Agent or Company


GST is not charged on any govt fees or consular charges paid for the particular services on behalf of the customer.

GST @18% will be levied on the Service Charge paid on travel-related services like Visa, Passport, etc.

ITC on GST paid can be claimed if the service is outsourced from another agent.


GST on Booking of Hotel/Cruise by Agent


In case of domestic hotel, the location of the hotel shall be the place of supply. And in case of international hotel booking, the place of supply shall be the location of the service (booking) provider (agent/company).

For hotel booking services, GST will also be charged on the commission received from passengers.


GST on Commission of Rail Travel Agents


18% GST is levied on the service charge (commission) collected by a rail travel agent from the customer.

No commission is paid by the railways to such agents, and therefore no GST is levied in this case.


GST on Rent-a-Cab Service


5% GST will be paid by a cab operator on the service charge collected from a customer on renting of a motor cab, including the cost of fuel.

No ITC is available on the GST paid.

For all other renting services, not covered above, GST will be charged @18% with ITC availability.