GST Explained for Tour Operators and Travel Agents
GST Explained for Tour Operators and Travel Agents
Mar 22, 2024
15 Mins
GST on Tours and Travels: HSN Code and GST Rate on Travel Agents' Services
There are now two separate rates of GST on tours and travels, depending on the availability of input tax credits (ITC). Without ITC, a 5% GST is applied to the gross tour price, while an 18% GST rate is applied with ITC. These different rates have implications for both travelers and tour operators in terms of total pricing.
To understand more about the HSN code for tours and travels, as well as the GST on travel agents, read on.
Taxation Scope for Tours and Travels
The regulations of Goods and Services Tax (GST) offer tour operators three different options for operation and claiming input credits. Input tax credit (ITC) in GST refers to the tax amount that businesses can subtract from the tax owed on the purchase of goods and services.
Here is a detailed explanation:
1. Acting as a tour operator without ITC: In this scenario, a tour operator charges customers 5% GST on the total package but does not claim any ITC.
2. Acting as a tour operator and claiming ITC: In this case, a tour operator charges customers 18% GST on the total package and claims ITC. However, it is necessary to consider the place of supply rule when claiming ITC.
3. Acting as a pure agent: The role of a tour operator in this scenario is that of a facilitator. They act as an intermediary, raising an invoice to customers charging 18% GST. The actual expenses incurred for services like travel, hotel, and boarding are separately mentioned on the invoice and taken as reimbursements from the customers. Proper records of these expenses must be maintained by the tour operator.
Value of Supply for GST on Tours and Travels
If a tour operator works as a pure agent, they can exclude the expenses incurred by the service provider from the value of their supply. This enables a more accurate determination of the tax liability, ensuring that tax is levied only on the actual service provided by the pure agent.
Time of Supply for GST on Tours and Travels
The time of supply for GST depends on whether the tour operator is acting as a pure agent or not.
If they are not acting as a pure agent, GST should be charged and paid at the time of payment or issuance of the invoice, whichever occurs earlier. In such cases, the tour operator should recognize its revenue on a payment basis for GST purposes.
However, if the tour operator chooses to act as a pure agent, GST should be charged at the time when the final invoice is raised or when the commission is received, whichever happens earlier.
Place of Supply for GST on Tours and Travels
When making a hotel reservation, the place of supply is determined by the city in which the hotel is located. The hotel will include GST in its invoice. However, if the company is not registered for GST in that specific place of supply, it cannot claim ITC on that invoice.
The same applies to flight tickets, where the place of supply is the place of flight departure. If the tour operator is not registered under GST in the state from which the flight departs, ITC cannot be claimed for that invoice.
GST on Tours and Travels with HSN Code
Under Heading 9985 of the GST Tariff Act, the applicable GST rate for tour and travel services is 5% if the following conditions are met:
1. The tour operator providing the services will not be eligible for ITC on services like hotels and air tickets, but ITC can be claimed on tour operator services obtained from another tour operator.
2. The tour operator must indicate in its invoice that the charged amount is the gross amount and includes charges for accommodation and transportation.
Here is a tabular representation of tours and travels SAC code and GST on travel agents’ services:
Description SAC GST rate
Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. 9985 Nil
Air Ticket Booking Services by Agents 998551 18%
Sale of Tour Packages 998552 5%
Service Charge paid on travel-related services like Visa, Passport, etc. 998555 18%
Booking of Hotel/Cruise by Agent 998552 2%-18% with ITC or 5% without
Commission of Rail Travel Agents 9967 18%
Rent-a-Cab Service 9967 5%
Other renting services 998559 18%
Availability of ITC Claims on Tours and Travels GST Rate
If a tour operator charges GST at the rate of 18% on the total amount, they will be eligible to claim ITC on various services such as rent, professional fees, lease lines, telephone, etc.
Here is a more detailed explanation of ITC availability with regards to the GST rate for tours and travels:
- Air travel agents can claim ITC on the GST paid for commission or service charges.
- Inbound tour fees charged on a commission basis are subject to 18% GST with ITC.
- ITC can be claimed if the service is outsourced from another agent.
- Hotels charging a commission will have 18% GST applicable, and ITC can be claimed.
- All other renting services are charged at 18% GST, with IT
GST on Tours and Travels: HSN Code and GST Rate on Travel Agents' Services
There are now two separate rates of GST on tours and travels, depending on the availability of input tax credits (ITC). Without ITC, a 5% GST is applied to the gross tour price, while an 18% GST rate is applied with ITC. These different rates have implications for both travelers and tour operators in terms of total pricing.
To understand more about the HSN code for tours and travels, as well as the GST on travel agents, read on.
Taxation Scope for Tours and Travels
The regulations of Goods and Services Tax (GST) offer tour operators three different options for operation and claiming input credits. Input tax credit (ITC) in GST refers to the tax amount that businesses can subtract from the tax owed on the purchase of goods and services.
Here is a detailed explanation:
1. Acting as a tour operator without ITC: In this scenario, a tour operator charges customers 5% GST on the total package but does not claim any ITC.
2. Acting as a tour operator and claiming ITC: In this case, a tour operator charges customers 18% GST on the total package and claims ITC. However, it is necessary to consider the place of supply rule when claiming ITC.
3. Acting as a pure agent: The role of a tour operator in this scenario is that of a facilitator. They act as an intermediary, raising an invoice to customers charging 18% GST. The actual expenses incurred for services like travel, hotel, and boarding are separately mentioned on the invoice and taken as reimbursements from the customers. Proper records of these expenses must be maintained by the tour operator.
Value of Supply for GST on Tours and Travels
If a tour operator works as a pure agent, they can exclude the expenses incurred by the service provider from the value of their supply. This enables a more accurate determination of the tax liability, ensuring that tax is levied only on the actual service provided by the pure agent.
Time of Supply for GST on Tours and Travels
The time of supply for GST depends on whether the tour operator is acting as a pure agent or not.
If they are not acting as a pure agent, GST should be charged and paid at the time of payment or issuance of the invoice, whichever occurs earlier. In such cases, the tour operator should recognize its revenue on a payment basis for GST purposes.
However, if the tour operator chooses to act as a pure agent, GST should be charged at the time when the final invoice is raised or when the commission is received, whichever happens earlier.
Place of Supply for GST on Tours and Travels
When making a hotel reservation, the place of supply is determined by the city in which the hotel is located. The hotel will include GST in its invoice. However, if the company is not registered for GST in that specific place of supply, it cannot claim ITC on that invoice.
The same applies to flight tickets, where the place of supply is the place of flight departure. If the tour operator is not registered under GST in the state from which the flight departs, ITC cannot be claimed for that invoice.
GST on Tours and Travels with HSN Code
Under Heading 9985 of the GST Tariff Act, the applicable GST rate for tour and travel services is 5% if the following conditions are met:
1. The tour operator providing the services will not be eligible for ITC on services like hotels and air tickets, but ITC can be claimed on tour operator services obtained from another tour operator.
2. The tour operator must indicate in its invoice that the charged amount is the gross amount and includes charges for accommodation and transportation.
Here is a tabular representation of tours and travels SAC code and GST on travel agents’ services:
Description SAC GST rate
Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. 9985 Nil
Air Ticket Booking Services by Agents 998551 18%
Sale of Tour Packages 998552 5%
Service Charge paid on travel-related services like Visa, Passport, etc. 998555 18%
Booking of Hotel/Cruise by Agent 998552 2%-18% with ITC or 5% without
Commission of Rail Travel Agents 9967 18%
Rent-a-Cab Service 9967 5%
Other renting services 998559 18%
Availability of ITC Claims on Tours and Travels GST Rate
If a tour operator charges GST at the rate of 18% on the total amount, they will be eligible to claim ITC on various services such as rent, professional fees, lease lines, telephone, etc.
Here is a more detailed explanation of ITC availability with regards to the GST rate for tours and travels:
- Air travel agents can claim ITC on the GST paid for commission or service charges.
- Inbound tour fees charged on a commission basis are subject to 18% GST with ITC.
- ITC can be claimed if the service is outsourced from another agent.
- Hotels charging a commission will have 18% GST applicable, and ITC can be claimed.
- All other renting services are charged at 18% GST, with IT
FAQs 🤔
Q: Can air travel agents avail of ITC?
A: Yes, air travel agencies are eligible for ITC on the GST they paid on the commission they received from passengers or travelers.
Q: Is GST applicable to cab service providers like Ola, Uber, etc.?
A: Yes. According to section 9(5) of the CGST Act, all cab service companies are required to pay GST.
Q: Is a tour operator taxable?
A: Tour operators are considered 'people', but the brokerage charged by them is taxable.
Q: How much GST is there on a flight ticket?
A: The GST on economy flight tickets is 5%, whereas for business and premium economy, it is 12%.
Q: Can air travel agents avail of ITC?
A: Yes, air travel agencies are eligible for ITC on the GST they paid on the commission they received from passengers or travelers.
Q: Is GST applicable to cab service providers like Ola, Uber, etc.?
A: Yes. According to section 9(5) of the CGST Act, all cab service companies are required to pay GST.
Q: Is a tour operator taxable?
A: Tour operators are considered 'people', but the brokerage charged by them is taxable.
Q: How much GST is there on a flight ticket?
A: The GST on economy flight tickets is 5%, whereas for business and premium economy, it is 12%.
Author
Pluto Team
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