Travel Agent and Tour Operator Services: GST

If you are a travel enthusiast who enjoys traveling but does not want to deal with the time-consuming process of searching for and booking hotels, transportation, and so on, you may be a travel-agent type of traveler, but you should be aware that your travel budget is not only exceeded by travel commission but GST is also paid for all such services. So you also pay the government. Determine how much of your budget is going to the government in the form of GST.

Definition:

A “Travel Agent” is a person or entity who acts as an intermediary and sells holiday packages and tours. Their services include accommodation, rail/air ticket booking, sightseeing, cab pickup drop, etc. The services they provide are commission based, on which they receive a certain amount of commission which is taxable and falls under the GST regime.

“The Tour operator” is a person or organization responsible for organizing, planning, and scheduling trips and holiday packages. They are brokers who provide such services and charge brokerage or fees for the same. The amount of brokerage is taxable, and GST is applicable to it.  

Types of Income sources for Travel Agents and Tour Operators:

A travel agency has two significant sources of income from which they can charge commission/service fees by raising an invoice to below mentioned:

1. The airline/hotels – actual service providers

2. Customer/Client

Let us check how much and what % of GST is applicable in either of the above ways.

Chargeable Services of Travel Agents

The chargeable services of Travel Agents are as follows:

1. Air Ticket Booking

2. Hotel Booking

3. Services like Visa, Passport

4. Rail Ticket Booking

Now, let us understand what percentage of GST applies to the services mentioned above:

1. Air Ticket Booking:

18% GST will be applicable on the commission received by an agent through the airline as well as the service charges collected from the customer. Now let us understand the bifurcation of GST to be paid on the commission received from Airlines and Air travelers.

• GST on Commission received from Airlines:

• In the case of Domestic Air Ticket – 18% on 5% of the Basic fare.
• In the case of International Air Ticket – 18% on 10% of the Basic fare.

• GST on processing fees received from Air Traveller:

• GST @ 18% on the invoice value from Air Traveller.

2. Hotel Booking:

GST will be applicable on bookings done through agents or intermediaries. Again, two ways GST will be charged, so let us understand in detail so we can get know which type of GST will be applicable, i.e. (IGST or CGST+SGST)

• When the Agent receives a commission from the Hotel:​

• If the Hotel is located in India, i.e., domestic, then the place of supply will be the location of the Hotel.

• If the Hotel is located outside of India, the place of supply will be the Agent’s location.

Let us comprehend all of this using an example:

Agent Location	Hotel Location	Place of Supply	Tax to be levied
Delhi	Hyderabad	Hyderabad	IGST
Delhi	New York	Delhi	CGST+IGST

• When the Agent receives a commission from Traveller:

• If a traveler is registered, then the place of supply will be the traveler’s location.
• If the traveler has not registered, the location of the supply will be the Hotel.

Let us comprehend all of this using an example:

Agent Location	Traveler Registration Status	Traveler Location	Hotel Location	Place of Supply for Agent	Tax to be levied
Delhi	Registered	Pune	Hyderabad	Pune	IGST
Delhi	Registered	Mumbai	Bangkok	Mumbai	IGST
Delhi	Unregistered	Malaysia	Kolkata	Kolkata	IGST

3. Services like Visa/Passport:

Visa and Passport services can be provided in two ways:

• Visa Statutory Authorities:

• If a customer directly approaches Visa Statutory Authorities, then the charges charged by the Statutory Authorities are exempted from GST.

• Visa Facilitation Centres:

• If a visa/passport is obtained from facilitation centers or through a travel agent, then the same shall be taxable. When an air travel agent provides these services by adding his commission, the same will be taxable at 18% GST, and he can take ITC of the tax paid to Visa Facilitation Centres.

4. Rail Ticket Booking:

A traveler has two ways to book a train ticket. He can book it through a rail travel agent or directly through railways. If he books a ticket through a rail travel agent, then GST will be applicable at 18% on the commission charged by the Agent to the traveler. At the same time, no commission is paid by the railways to the Agent for the booking.

These were the GST on several services provided by the Agent. Now, what about the GST on the Tour operator services or company? They sell entire tour packages and let’s check whether they will be liable to pay GST.

A. If Service provider and Recipient, both are in India:

1. Recipient is Registered – Place of supply will be the location of the recipient.

2. Recipient is Unregistered – Place of Supply will be the location of the recipient, if the address on records exists.

B. If Either the Service Provider or Recipient is outside India:

GST on the Sale of Tour Packages

1. Inbound Tour: India Tour for Foreign travelers

➢ If the customer is charged on a principal basis for the inbound tour, 5% GST will be charged without benefit to claim ITC.

➢ If the customer is charged on a commission basis for the inbound tour, then 18% GST will be charged with the benefit of claiming ITC.

2. Outbound Tour: Foreign Tour for an Indian/Foreigner

• If the customer/traveler is made to pay on a principal basis and also registered, the place of supply will be the location of the customer. 
• If the customer/traveler is charged on a principal basis, but is not registered, then the place of supply will be the customer’s location per the service provider’s records.

Conclusion:

According to the detailed explanation above, all services provided by travel agents or tour service providers to customers are subject to taxation under the GST tax regime. So, make sure you understand the GST that your travel agent charges you for the services he provides, so you can plan your next trip budget with confidence.

Frequently Asked Questions:

1. What is the full form of ITC?

Ans: ITC means Input Tax Credit.

2. What is the meaning of Input Tax Credit?

Ans: Input Tax Credit is the tax a business can claim to reduce their tax liability to the limit of GST paid on purchases.

3. Can air travel agents avail for ITC?

Ans: Yes, the air travel agents can avail of ITC on GST paid on the commission received from the passenger/traveler.

4. Is GST applicable to the cab service providers like Ola, Uber, etc.?

Ans: Yes, Cab service providers like Ola and Uber are liable to pay GST to the government as per section 9(5) of the CGST Act.  

5. Are Cab drivers liable to get registered and pay GST?

Ans: No, it is not mandatory for cab drivers to register, and they are also not liable to pay any tax.

6. What if I want to avoid claiming ITC? How much GST do I have to pay?

Ans: You are liable to pay 5% GST on the total amount if you want to avoid claiming ITC for CAB rental services

7. What is SAC? And what is the meaning of it?

Ans: SAC code means Services Accounting Code. SAC is applied to all the services provided within India.

8. Why is the SAC code used?

Ans: SAC code is used to bifurcate, identify and determine the type of services provided and the rate of tax to be charged.

9. Why is it necessary to know the place of supply of the Agent?

Ans: Place of Supply will help us to determine the type of supply, i.e. Intra- State or Interstate.

10. What is the complete form of the HSN Code?

Ans: HSN Code means Harmonized System of Nomenclature Codes.  

11. What is the difference between the HSN and SAC codes?

Ans: SAC codes are used for the provision of services, whereas HSN codes are used for the Sale of Goods.