Tourism is a significant contributor to the Indian economy, providing socioeconomic benefits and positively impacting industries like food manufacturing, services, and construction. It creates jobs, generates income and foreign exchange. The tourism and hospitality industry includes accommodations, catering, transportation, attractions, and travel agencies/tour operators. Learn more about the GST on tour and travel agencies below.
Business Models for Tour Operators
Tour operators can use different business models to sell travel-related services and merchandise.
The following are some popular business models for tour operators:
- Tour Package: The tour operator includes their margin in the total fees charged, acting as a service provider that coordinates bookings with various counterparts.
- Pure Agent Tour Operator: The tour operator helps travellers find suitable suppliers and facilitates transactions but only charges for their services, not the end service provided.
- Flight and Hotel Booking with Backend Commission: The tour operator facilitates transactions and bookings without charging customers any fees. Instead, the ultimate supplier pays a commission to generate sales.
GST Registration for Tour Operator & Travel Agents
Every business in India whose aggregate turnover in a financial year is above Rs 40 Lakhs and Rs. 20 lakhs in special category states will have to get GST Registration Mandatorily.
So, tour operators and travel agents also need to get GST Registration Online as per above GST Registration Threshold Limit.
Furthermore, GST Registration is mandatory, if tour operators and travel agents make inter-state taxable supply or makes taxable supply of goods or service or both on behalf of other taxable people,
Learn in detail: GST Registration for tour operators
GST Implications on Various Travel Related Services by Agents
GST on Air Ticket Booking Services by Agents
- 18% GST on commission income, service charges, and other charges collected from passengers
- Input Tax Credit (ITC) available on GST paid on commission/service charge by an air travel agent
- GST on travel agents’ commission is charged at 18%
- The type of GST imposed depends on the location of supply
In addition to this, consider reading: GST on air tickets
GST on Sale of Tour Packages
- 5% GST on tour operator services without ITC
- 5% GST on gross commission/fee charged from the customer
- GST on inbound tour fees charged on Principal basis at 5% without ITC
- GST on inbound tour fees charged on Commission basis at 18% with ITC
- GST on outbound tour packages being offered to a person based in India charged at the location of service receiver
- No GST charged on commission received in convertible foreign currency for outbound tour packages offered to foreigner for visiting another foreign country
GST on Travel Related Services like Visa, Passport, etc. by an Agent or Company
- No GST charged on government fees or consular charges paid for the particular services
- 18% GST levied on Service Charge paid on travel-related services like Visa, Passport, etc.
- ITC can be claimed if the service is outsourced from another agent
Understand in detail: GST on passport and visa services
GST on Booking of Hotel/Cruise by Agent
- Place of supply depends on the location of the hotel for domestic hotel bookings and the location of the service provider for international hotel bookings
- GST charged on the commission received from passengers.
- 18% on Commission received from the hotel. ITC is available.
- If the hotel invoice is not in the name of the client, the tax will be based on the full amount charged for the booking.
- Depending on the situation, the applicable GST rate will either be 12%-18% with Input Tax Credit or 5% without Input Tax Credit.
- However, for international bookings not within the taxable territory, no GST will be charged.
Watch our detailed video at: How GST applies on hotel business?
Also read: GST Registration for Hospitality Business
GST on Commission of Rail Travel Agents
- 18% GST levied on service charge (commission) collected from the customer
- No commission is paid by the railways to such agents, and no GST levied in this case.
- The SAC (Service Accounting Code) assigned to Rail travel agents is 9967.
GST on Rent-a-Cab Service
- 5% GST paid by cab operator on service charge collected from the customer on renting of a motor cab, including the cost of fuel
- No ITC available on GST paid
- All other renting services charged at 18% with ITC availability
In conclusion, The Indian tourism industry is vital for the economy, creating jobs and boosting various industries. Tour operators use different business models and must register for GST if their turnover exceeds the threshold limit or as per other GST regulations. GST implications on various services, such as air ticket booking, tour packages, hotel and cruise booking, and rail travel agents’ commission, vary based on a number of factors.
Moreover, If you want any other guidance relating to GST Return Filing or GST Registration, please feel free to talk to our business advisors at 8881-069-069.
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