GST on Travel, Travel Agents and Tour Operators in India (2026)
Travel is one of the most GST-touched activities in India, because a single trip can bundle flights, hotels, cabs, rail tickets and a tour operator’s own margin, each taxed under different rules. After the GST 2.0 reforms that took effect on 22 September 2025, the rate structure was simplified into mainly 5% and 18% slabs. This 2026 guide explains how GST applies to travel, travel agents and tour operators, along with ITC and TCS points you should know.
GST on passenger travel (2026)
The tax depends on the mode of transport and, for flights and hotels, on the class or tariff. Here is the current picture for journeys within or departing from India.
| Mode of travel | GST rate (2026) | Notes |
|---|---|---|
| Air travel – economy class | 5% | SAC 996425; applies to domestic and international flights departing India |
| Air travel – business, premium economy & first class | 18% | Higher slab, but full ITC for genuine business travel |
| Rail – AC classes & first class | 5% | Non-AC sleeper, second class and general tickets are exempt |
| Radio taxi / app-based cab (AC) | 5% | Charged by the operator; ITC generally restricted |
| Non-AC public transport (stage / contract carriage) | Exempt | Ordinary buses and metered autos remain outside GST |
| Hotel room up to Rs 7,500 per night | 5% (no ITC) | Threshold checked per room, per night |
| Hotel room above Rs 7,500 per night | 18% (with ITC) | Treated as specified premises |
A useful point for corporate travellers: both the 5% economy fare and the 18% business-class fare allow Input Tax Credit when the trip is for a genuine business purpose and the company’s GSTIN is entered at the time of booking.
GST on tour operators
A tour operator who sells a bundled package (transport plus accommodation plus sightseeing) can generally choose between two models:
- 5% without ITC on the gross package value (SAC 998552). The operator cannot claim credit on hotels, flights or cabs bought as inputs.
- 18% with full ITC, where the operator charges 18% on the package and claims credit on eligible input taxes.
A third route is the pure agent model: the operator charges GST only on its own service fee or margin and shows the actual hotel, airline and transport costs as pass-through reimbursements, provided the pure-agent conditions are met. Tours arranged wholly outside India for foreign tourists can qualify for nil / zero-rated treatment in specified situations, so cross-check the place-of-supply position before invoicing.
GST on travel agents (commission and service charges)
A travel agent who merely books a ticket or hotel and earns a commission or service fee is taxed differently from a package tour operator. The commission or convenience fee is generally taxed at 18%:
- Air ticket booking commission – 18% (SAC 998551)
- Rail ticket booking / agency services – 18%
- Visa, passport and forex facilitation charges – 18%
Air travel agents can also opt to pay GST on a deemed value of the basic fare (a small percentage for domestic and international bookings) instead of the actual commission, under the special valuation option available to them.
Input Tax Credit (ITC) rules for travel
ITC is where most travel businesses and their clients lose or save money, so the details matter:
- Flights: ITC is available on both 5% and 18% air tickets for business travel, but only if the GSTIN appears on the invoice and the credit shows up in your GSTR-2B.
- Tour packages: the 5% scheme blocks ITC entirely; the 18% scheme allows it. Businesses that want to claim credit should ask the operator to bill under the 18% ITC model.
- Cabs / rent-a-cab: ITC on the 5% cab supply is generally blocked under Section 17(5) unless the recipient is in the same line of business or the travel is legally obligatory for employees.
- Hotels: credit is available only on rooms taxed at 18%; the 5% budget-room category carries no ITC.
Place of supply for travel services
Place of supply decides whether CGST plus SGST or IGST applies, and which state’s rules govern the transaction:
- Passenger transport: the place of supply is where the passenger embarks on the conveyance for the continuous journey. If the embarkation point is not known at booking, it is the location of the registered recipient, or the address on record for an unregistered one.
- Accommodation: for hotel stays the place of supply is the location of the property, so a hotel in another state usually charges CGST plus SGST of that state, which affects your ability to claim ITC there.
- Tour operator services: for a registered business customer the place of supply generally follows the recipient’s location, making IGST common on inter-state B2B bookings.
TCS on overseas travel and tour packages
Separate from GST, tour operators selling overseas tour packages must collect Tax Collected at Source (TCS) under Section 206C(1G). For FY 2025-26 the rates are:
- 5% on overseas package spend up to Rs 10 lakh in a financial year.
- 20% on the portion above Rs 10 lakh in the same financial year.
The Rs 10 lakh limit (raised from Rs 7 lakh) is counted per traveller across the whole financial year, not per package. TCS is not an extra cost you lose – it is fully adjustable against your income-tax liability when you file your ITR, with any excess refunded. Domestic travel does not attract TCS.
Registration and compliance for travel businesses
Travel agents and tour operators must register for GST once turnover crosses the applicable threshold (generally Rs 20 lakh, or Rs 10 lakh in special-category states), and often earlier if they make inter-state supplies. Correct SAC codes, the right rate model and clean place-of-supply invoicing all reduce audit risk. If you are setting up a travel agency or tour operation and want help choosing between the 5% and 18% models, our team can walk you through GST registration and structuring for your specific setup.
Frequently asked questions
Is GST charged on international flight tickets from India?
Yes. Flights departing India are taxed at 5% for economy and 18% for business, premium economy and first class, whether the destination is domestic or international. Only tickets sold and issued entirely outside India (SOTO fares) fall outside Indian GST.
Should a tour operator choose the 5% or 18% GST model?
Choose 5% without ITC if most customers are individuals who cannot use credit, since the headline price stays low. Choose 18% with ITC if you serve businesses that claim credit or if your input taxes are high, because the credit can offset the higher rate.
Can my company claim ITC on employee flight and hotel bills?
Yes, on flights at both 5% and 18% and on hotel rooms taxed at 18%, provided the company GSTIN is on the invoice and the credit reflects in GSTR-2B. Budget rooms taxed at 5% and most cab services do not allow ITC.
Is TCS on a foreign tour package an additional tax I lose?
No. TCS is collected at 5% up to Rs 10 lakh and 20% beyond, but it is fully creditable against your income-tax liability in your return, so you either adjust it or get it refunded.
Do I need GST registration to run a small travel agency?
Registration becomes mandatory once turnover crosses Rs 20 lakh (Rs 10 lakh in special-category states), and usually earlier if you make inter-state supplies or sell through e-commerce platforms.
Travel taxation blends GST rate choices, ITC blocks and TCS timing, and small errors can quietly raise your cost or trigger notices. If you would like a clear, compliant setup for your travel or tour business in 2026, reach out to the TAXAJ team and we will help you get it right from the first invoice.
