GST Impact on Tour and Travel Agent
GST Impact on Tour and Travel Agent
With passage of time and increase in prosperity, most people recognise the importance of work life balance. Nowadays, people take vacations sooner than ever, be it local or foreign.. everyone loves to explore. Such a trend has given rise to tour and travel operators. People who make sure you enjoy without any problem. Let us see what GST has for these agents.
Travel and Tourism sector holds great strategic importance. Apart from providing employment, income, foreign exchange for the country, it has a positive impact on other associated industries such as food manufacturing, services, construction etc.
In addition, investments in infrastructural facilities such as transportation, accommodation and other tourism related services lead to an overall development of infrastructure in the economy.
The major sources of income of Tour Operators & Travel Agents are:
1. Commission from Airline,
2. Sale Tour Packages, both inbound and outbound,
3. Travel Related Services like Visa, Passport etc,
4. Hotel Bookings,
5. Car Rental Services, Travel Insurance,
6. Railway Reservations.
Let us study about these in detail.
1) Commission from Airlines
An Air Travel Agent gets commission from the Airlines for booking of air tickets. He also gets income in the form of processing fees etc from the client for whom he books the tickets.
Since the income is generated from airlines as well as the client there are two parties involved and hence two separate invoices have to be issued.
There are 2 options available to the Agent to pay GST-
Option A : GST @ 18% on Commission /PLA upload incentive / any other form of incentive on Issue of invoice on Airline/ Consolidator.
Service Fees @ 18% on Issue invoice on Passenger.
Option B : As per rule 32 of CGST Rules - The value of services in relation to booking of tickets for travel by air, shall be 5% of basic fare in case of local flight and 10% in case of international flight.
Accordingly – GST on basic fare- For domestic booking 0.9% of Basic Fare and For International Booking 1.8% of basic fare.
Now Air Travel agent can pay tax on any of the option given above.
2) Sale of Tour package, Inbound and Outbound
Tours organized by the Tour Operator, within India for the tourist coming from abroad is generally known as inbound tours.
Tours organized by the Tour Operator, outside India, for the tourist going abroad is generally known as outbound tour.
The tour operator may do it on commission basis or second on principle basis i.e. he does all the bookings and later raises the bill on client.
If the tour is on commission basis then the tour operator will be acting as an intermediary and the place of supply shall be the location of service provider i.e. in India and hence the services will now become taxable and Taxable @ 18%.
If the tour is on principle basis then the place of supply of service shall be the location of performance of service i.e. in India and Taxable @ 5% without ITC.
3) Travel related services like Visa, Passport etc
If the agent pays government fees or consular charges, which are usually incurred while applying for visa, on behalf of consumer, such fees will not attract GST.
However, if agent charges service fee for these services, he will collect GST from the end consumer.
If the services are outsourced from another service provider (For example a travel agent from Mumbai has to outsource a Hyderabad Agent to get the Visa for US), GST paid on the Delhi Agents Invoice can be claimed as ITC and only the difference can be paid to the Government.
GST applicable is 18%.
4) Commission on Hotel Booking
In most of the cases, tour operator helps in or arranges accommodation as well, be it hotels or resorts or any other place.
In this case, the agent acts as intermediary for the purpose of booking tours for his clients.
In case it is domestic hotel booking then the place of supply shall be as per the general rule i.e. location of hotel.
In case it is international hotel booking then the place of supply shall be location of Agent. ‘
GST applicable is 5%
5) Car Rental services, Rental services
In case of renting motor cab, 18% GST will apply.
Travel agents also issue mediclaim policies and travel insurance to their clients to insure them against any unfortunate happening while on a trip.
GST applicable is 18%.
6) Railway Commission
Tour agent may book tickets in railway for his client. For this, he gets a commission from railway as well. This is just like commission from Airlines.
He also charges service fee to his client
In both the cases, GST applicable is 18%.
