GST on Tour & Travel Services

GST comes under the category of indirect tax which is levied on the supply of goods & services of different kinds. The travel agent or travel agency service provider are also under the GST ambit. 

A travel agent offers services related to planning, booking, and managing tours to their customers. The services include-booking air/rail accommodation, cab hire, accommodation, sightseeing etc. provided by a travel company.

A tour operator or agent provides services on behalf of Airline companies, hotels, taxi operators etc. and get a commission for the same. GST is charged on the amount of commission.

As per Heading 9985 of GST Tariff Act, 2017, The rate of GST would be 5% (2.5% CGST+2.5% SGST) provided following conditions are met,

1. Input tax credit on services availed by the entity will not be available. However, Input Tax Credit on the services taken from other Tour Operator are allowed.

2. The entity shall indicate in its invoice that the amount charged is gross amount and inclusive of charges of accommodation and transportation

There are two types of Tour operators

1. Acting as a Pure Agent

2. Tour operator service provider

Who is a pure agent?

An Explanation of pure agent to Section 33 of CGST Rules prescribes all the following conditions to be satisfied to be a Pure agent.

1. A person who enters into a contractual agreement with the recipient of supply to incur his expenditure or cost during supply of goods or services or both.

2. He /she neither intends to hold nor holds any title to the goods or services or both so procured or supplied of the recipient of the supply.

3. He/she does not use such goods or services so procured for his own interest.

4. He/she is entitled to receive only the actual amount incurred by him and in addition for the supply provided by him on his own account.

When GST is applicable for a Pure Agent?

The value of the supply of services in case of pure agent has been defined in Section 33 of CGST Rules. The expenditure or costs incurred by a supplier as a pure agent of the recipient of the supply shall be excluded from the total value of supply if all the following conditions are satisfied:

1. He/she makes the payment to the third party on the authorization of such recipient.

2. Such payment made by the pure agent has been solely indicated in his/her invoice as reimbursement.

3. The supplies procured by the pure agent from third parties are in addition to the services he supplies on his own account.

What rate is applicable for Pure Agent?

GST Rate is 18% with Input Tax Credit (CGST 9% and SGST 9% or IGST 18%). The GST will be levied on the value of service (excluding reimbursement of expenses). In our example, the GST will be levied on the value of Rs.10,000/- and not the entire value of Rs.60,000/-.  

Is there any restriction in availing Input Tax Credit? 

No. 

How does tour operators differs from a Pure Agent?

A pure agent only facilitates the transaction & helps the travellers to identify various supplier according to their requirements. In case of tour operator, he/she does the entire booking of tours and the total fees charged shall include his /her margin. So, he/she becomes a tour operator service provider & the entire service value is leviable under GST.

What rate is applicable for Tour Operator?

GST Rate is 5% with a restriction on availing of Input services (CGST @2.5% and SGST @ 2.5% or IGST @5%].

Is there any condition to be fulfilled by the Tour operator?

Yes. The tour operator needs to fulfil these condition to avail composite GST Rate @ 5%.

1. The bill issued for the supply of this service indicates that it is inclusive of charges of accommodation and transportation required for such tour and

2. the amount charged in the bill is the gross amount charged for such a tour.

Is there any restriction in availing Input Tax Credit?

Yes. The input tax credit of both goods & services not available. However, the ITC of input service is available in the same line of business.

Whether the service provider collects CGST & SGST or IGST?

Yes. It may vary depending on the place of supply.

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