Archive for December, 2023

GST on Tour Operator & Travel Agents.

December 23rd, 2023

Finance & Investment,Law
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The Importance of Tourism in India and its Impact on Industries Tourism is a crucial sector in the Indian economy that offers numerous socioeconomic benefits and positively impacts industries such as food manufacturing, services, and construction. It generates income, creates jobs, and contributes to foreign exchange earnings. The tourism and hospitality industry includes accommodations, catering, transportation, attractions, and travel agencies/tour operators. Different Business Models for Tour Operators Tour operators use various business models to sell travel-related services and merchandise. Some popular business models for tour operators include Tour Packages, Pure Agent Tour Operator, and Flight and Hotel Booking with Backend Commission. GST Registration for Tour Operators and Travel Agents In India, businesses with an aggregate turnover exceeding Rs 40 lakhs in a financial year, and Rs 20 lakhs in special category states, must mandatorily register for GST. Therefore, tour operators and travel agents must also obtain GST registration online as per the GST Registration Threshold Limit. GST registration is also compulsory for tour operators and travel agents who make inter-state taxable supplies or taxable supplies of goods or services on behalf of other taxable persons. GST Implications on Various Travel-Related Services by Agents GST has implications on several travel-related services offered by agents, including air ticket booking, tour packages, travel-related services like visa and passport, hotel and cruise booking, and commission of rail travel agents. GST on Air Ticket Booking Services by Agents: An 18% GST is charged on commission income, service charges, and other charges collected from passengers, and Input Tax Credit (ITC) is available on GST paid on commission/service charge by an air travel agent.GST on Sale of Tour Packages: A 5% GST is charged on tour operator services without ITC and gross commission/fee charged from the customer. GST on inbound tour fees charged on a principal basis is 5% without ITC, while on a commission basis, it is 18% with ITC. GST on outbound tour packages being offered to a person based in India is charged at the location of the service receiver. No GST is charged on commission received in convertible foreign currency for outbound tour packages offered to foreigners for visiting another foreign country. GST on Travel-Related Services like Visa, Passport, etc. by an Agent or Company: No GST is charged on government fees or consular charges paid for the particular services, and an 18% GST is levied on service charges paid on travel-related services like visa, passport, etc. ITC can be claimed if the service is outsourced from another agent. GST on Booking of Hotel/Cruise by Agent: The 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 is charged on the commission received from passengers, while an 18% GST is charged on commission received from the hotel, and ITC is available. The applicable GST rate will either be 12%-18% with Input Tax Credit or 5% without Input Tax Credit, depending on the situation. However, no GST is charged for international bookings not within the taxable territory. GST on Commission of Rail Travel Agents: An 18% GST is levied on the service charge (commission) collected from the customer, while no commission is paid by railways to such agents, and no GST is levied in this case. The SAC (Service Accounting Code) assigned to Rail travel agents is 9967. GST on Rent-a-Cab Service: A 5% GST is charged by cab operators on the service charge collected from the customer on renting a motor cab, including the cost of fuel. No ITC is available on GST paid. All other renting services are charged at 18% with ITC availability.

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