GST on Travel Agents & Tour Operators

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vinodchaurasia

Introduction: This article discusses in detail about GST on Travel Agents & Tour
Operators & its related aspects.

Air Travel Agent

An Air Travel Agent earns two types of income:

1. commission from the Airlines for booking of air tickets;

2. income in the form of processing fees etc. from the client for whom he books the
tickets.

So the Air Travel Agent shall be raising below 2 types of invoices containing the details of
name, address, GST Registration Numbers of the parties to whom the invoice is being
issued and details about Place of Supply.:

1. On the Airlines for commission for selling its Air tickets;

2. On the Air traveler for its processing fees/ service charges / facilitation charges.

As per rule 32(3) of CGST Rules, the value of supply of services in relation to booking of
tickets for travel by air provided by an air travel agent, shall be deemed to be an amount
calculated at the rate of:

1. 5%of the basic fare in the case of domestic bookings, and

2. 10%of the basic fare in the case of international bookings

Explanation – For the purposes of this sub-rule, the expression “basic fare” means that
part of the air fare on which commission is normally paid to the air travel agent by the
airline.

So, GST is payable is as par below chart:

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Place of supply for an Air Travel Agent(ATA) for booking tickets to Pax

When an Air Travel Agent provides services to a person who is:

1. Located in India and the person is registered under the GST law then, the place of
Supply shall be the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not available
on records then the place of Supply shall be the location of the service provider;

4. If in case of the Air Travel Agent who is located in India but the Origin and Location of
Airlines is not from India and the destination as well as location of passenger is not in India.

Then in the given case neither the Airlines nor the passenger will be registered under GST
and nor will their address be available from the records, hence in the given case the place
of supply shall be the location of service provider i.e. the location of the Air Travel Agent
which is in India and hence this transaction would be liable to Tax.

Examples for place of supply in case of an Air travel Agent where ATA receives processing
fees / Service charges from the Passenger (Pax):

Location of Air Location of the Place of supply for the Air Tax to be charged by the Air
travel Agent recipient (Pax) Travel Agent Travel Agent

Delhi Delhi Delhi CGST/SGST

Gurgaon Delhi Delhi IGST

(Haryana)

Examples for place of supply in case of an Air travel Agent where ATA receives
Commission from the Airlines:

Location of Air Location Of the Place of supply for the Air Tax to be charged by the Air
travel Agent Airlines Travel Agent Travel Agent
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 Delhi Delhi Delhi CGST/SGST

Delhi Gurgaon ( Gurgaon ( Haryana) IGST

Haryana)

Delhi London (UK) Delhi CGST/SGST

Segment Payouts / commission/ incentives from CRS/GDS

Air Travel Agent also earns Segment Payouts / commission/ incentives from CRS/GDS like
Ameadus, Worldspan, Galileo, Abacus for using their software for making booking in
Airlines reservations systems.

Place of supply of services.

1. In case the services are provided by the Air Travel Agents to Indian software
companies, then the place of supply of services shall be the location of services
receiver i.e. place of registration of Indian software company.

2. In case the services are provided by the Air Travel Agents to foreign software
companies, then the agent would fall within the definition of “intermediary” AND the
place of supply of services shall be the location of services provider i.e. place of Air
Travel Agent.

VISA AND PASSPORT ASSISTANCE

The visa processing charges charged by visa statutory authorities i.e. the
consulates/embassies will be exempt from the payment of GST.

Visa/passport processing charges charged only by the statutory authorities is exempt from
tax.

Visa/passports are done through Visa Facilitation Centers (VFCs) authorized by embassies
/ Visa Handling Agents then the same shall be liable to tax.

However, when the ATA provides these services to their client after adding further fees by
whatever name called he shall be liable to pay tax on them as well and he can take Input
Tax Credit of the tax paid to the VFC. GST will be applicable @18% for this service.

DOMESTIC AND INTERNATIONAL MEDICLAIM POLICIES AND TRAVEL INSURANCE

BY TRAVEL AGENTS

Travel Agents issues mediclaim policies and travel insurance for clients through various
insurance service providers and gets commission on cut and pay basis or at the end of the
month (for overseas policies)

The Travel Agents must be registered Insurance agent to issue mediclaim policies and
travel insurance in India.

The agents are required to register with IRDA as per Insurance Act, 1938.

Place of supply for an Air Travel Agent(ATA) for issuing travel/ mediclaim insurance
policies to Pax shall be as listed below.
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When an Air Travel Agent provides services to a person who is:

1. Located in India and is registered under the GST law then, the place of Supply shall be
the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not available
on records then the place of Supply shall be the location of the service provider;

4. If in case of the Air Travel Agent who is located in India but the mediclaim and travel
insurance services are provided to a person who is not located in India, then the place of
supply shall be the location of service provider i.e. the location of the Air Travel Agent
which is in India and hence this transaction would be liable to Tax.

GST will be applicable @18% for this service

DOMESTIC / INTERNATIONAL HOTEL BOOKINGS

1. In case of hotel bookings the tour operator is acting as an intermediary for the
purpose of booking tours for his
2. Hence in case it is domestic hotel booking then the place of supply shall be as per
the general rule i.e. location of Hotel.
3. In case it is international hotel booking then the place of supply shall be location of
agent.

Examples for place of supply in case of an Agent where the agent receives Commission
from the hotel/Cruise:

Location of Travel Location of the Hotel Place of supply for the Tax to be charged by the
Agent / Cruise Travel Agent Travel Agent

Delhi Delhi Delhi CGST/SGST

Delhi Gurgaon ( Haryana) Gurgaon ( Haryana) IGST

Delhi London (UK) Delhi CGST/SGST

Place of Supply for an agent who books hotel/Cruise for the client and receives Service
charges/ Markup from the client and hotel/Cruise directly raise invoice to the client, when
service recipient is:

1. Located in India and is registered under the GST law then, the place of Supply shall be
the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not available
on records then the place of Supply shall be the location of the service provider;

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4. where the location of Tour operator is in India and the location of the recipient is out of
India, the place of supply in this case shall be the:

Location where the services are actually performed

Examples for place of supply in case of an Agent where the agent receives Service
charges/Markup from the Pax :

Location Location of the Pax Location of Place of supply for the Tax to by
of Agent (address for Billing to the Hotel/ Agent charged by
pax) Cruise the Agent

Maharashtra Maharashtra Gujarat Maharashtra CGST/SGST

Maharashtra Delhi Gujarat Delhi IGST

Maharashtra USA Gujarat Gujarat (location where IGST

service is actually
performed)

Maharashtra Delhi USA Delhi IGST

GST will be applicable @5% with no ITC

Inbound /outbound package tours provided by the tour operator

Inbound tour operators

Tours organized by the Tour Operator, within India for the tourist coming from abroad is
generally known as inbound tours.

There may be two types of contracts entered into by the tour operator:

1. the tour operator receives commission i.e. it has booked the tour on commission
basis or
2. on principal basis i.e. on its own account has done the various bookings and then
raises bill on the client.

If the tour is on principal 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.

However 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%.

Outbound tour operators

Tours organized by the Tour Operator, outside India, for the tourist going abroad is
generally known as outbound tour.

There may be two types of contracts entered into by the tour operator:

1. the tour operator receives commission i.e. it has booked the tour on commission
basis or
2. on principal basis i.e. on its own account has done the various bookings and then
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 raises bill on the client.

The Place of supply in case where the tour operator receives commission from another tour
operator situated outside India, shall be the place of the tour operator i.e. India.

The place of supply in case of Principal to Principal outbound tour operator services is,
when service recipient is:

1. Located in India and is registered under the GST law then, the place of Supply shall be
the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not available
on records then the place of Supply shall be the location of the service provider;

Car rental
The place of supply where an agent is booking a car on hire (with or without driver) to be
further provided to any Pax or any Agent for Service charges/Markup, shall be determined
as below.

When an Travel Agent provides services to a person who is:

1. Located in India and is registered under the GST law then, the place of Supply shall be
the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not available
on records then the place of Supply shall be the location of the service provider;

4. If in case of the Air Travel Agent who is located in India but the mediclaim and travel
insurance services are provided to a person who is not located in India, then the place of
supply shall be the location of service provider i.e. the location of the Air Travel Agent
which is in India and hence this transaction would be liable to Tax.

Examples for place of supply in case of an Agent where the agent books a car for a pax or
for an agent on Service charge basis :

Location of Location of the Location of the place where Place of supply Tax to be charged
Agent Pax/ Agent car is to be used for the Agent by the Agent

Maharashtra Maharashtra Gujarat Maharashtra CGST/SGST

Maharashtra Delhi Gujarat Delhi IGST

Maharashtra USA (Foreign Gujarat Maharashtra CGST/SGST

person)

GST applicable for renting of motor vehicle shall be @ 5% with no ITC or 12% with ITC.
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Foreign Railway booking:
If an agent is receiving commission from a foreign railway company which has its registered
office out of India, the place of supply shall be determined in accordance with Section 13(8)
(c), i.e. Location of supplier of Service (INTERMEDIARY) i.e. the agent.

If an agent is receiving commission from a foreign railway company which has its registered
office in India, the place of supply shall be determined in accordance with Section 12(2),
i.e. when an Travel Agent provides services to a person who is:

1. Located in India and is registered under the GST law then, the place of Supply shall
be the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not
available on records then the place of Supply shall be the location of the service
provider.

Examples for place of supply in case of an Agent where the agent receives commission
from the foreign railway company:

Location of Location of the Foreign Railway Place of supply for the x to be charged by the
Agent Company Agent Agent

Maharashtra Maharashtra Maharashtra CGST/SGST

Maharashtra Delhi Delhi IGST

Maharashtra USA Maharashtra CGST/SGST

If the agent is receiving Service charges from the Pax, the place of supply shall be
determined in accordance with Section 12(2), i.e. when an Travel Agent provides services
to a person who is:

1. Located in India and is registered under the GST law then, the place of Supply shall
be the location of service receiver;

2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;

3. Located in India but not registered under the GST Law and his address is not
available on records then the place of Supply shall be the location of the service
provider.

Examples for place of supply in case of an Agent where the agent receives Service
charges from the Pax:

Location of Location of the Place of supply for the Tax to be charged by the
Agent Pax Agent Agent

Maharashtra Maharashtra Maharashtra CGST/SGST

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 Maharashtra Delhi Delhi IGST

GST for booking for foreign railway is @18%

Foreign Exchange:
The following options for determining value of supply for a person providing service in
relation to purchase or sale of foreign currency and money changing:

Option A

When any currency is exchanged Value shall be difference between the Buying or selling rate and
from or to Indian Rupees (INR) RBI reference rate, multiplied by total units of currency

If in relation to the above case, RBI Value shall be 1% of gross amount of INR provided or received
reference rate is not available by the person changing the money

If neither of the currencies Value shall be 1% of lesser of two amounts by converting any of
exchanged in INR the two currencies into INR

Option B

Gross Amount of Value to be considered for Supply of Service

Currency Exchanged

Upto Rs. 1,00,000 1% of Gross amount of currency Exchanged, Subject to Minimum

amount of Rs. 250.

Exceeding Rs. 1,00,000 to Rs. 1,000 + 0.5% of Gross amount of currency Exchanged
Rs.
10,00,000

Exceeding Rs. 10,00,000 Rs. 5,000 + 0.1% of Gross amount of currency Exchanged, Subject to
Maximum amount of Rs. 60,000.

List of Travel related services along with HSN code & rates of taxes

HSN Particulars of Services Rate of

CODE Tax

9964 Transport of passengers, with or without accompanied belongings, by – (a) air, Nil
embarking from or terminating in an airport located in the state of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or
at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage
other than radio taxi, for transportation of passengers, excluding tourism,
conducted tour, charter or hire; or (c) stage carriage other than air-conditioned
stage carriage.

9964 Services provided to the Central Government, by way of transport of passengers Nil
with or without accompanied belongings, by air, embarking from or terminating at
a regional connectivity scheme airport, against consideration in the form of viability
gap funding: Provided that nothing contained in this entry shall apply on or after
the expiry of a period of one year from the date of commencement of operations of
the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.

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9964 Service of transportation of passengers, with or without accompanied belongings, Nil
by— (a) railways in a class other than— (i) first class; or (ii) an air-conditioned
coach; (b) metro, monorail or tramway; (c) inland waterways; (d) public transport,
other than predominantly for tourism purpose, in a vessel between places located
in India; and (e) metered cabs or auto rickshaws (including e-rickshaws).

9964 Transport of passengers by rail in first class or air conditioned coaches 5 – with
ITC of
input
services

9964 Transport of passengers, by- (a) air conditioned contract carriage other than 5 – No
motorcab; (b) air conditioned stage carriage; (c) radio taxi ITC &
12 with
ITC

9964 Transport of passengers by air in economy class 5 – with

ITC of
input
services

9964 Transport of passengers, by air, embarking from or terminating in a Regional 5 – with

Connectivity Scheme Airport ITC of
input
services

9964 Transport of passengers by air in other than economy class. 12

996411 Local land transport services of passengers by railways, metro, monorail, bus, 18
tramway, autos, three wheelers, scooters and other motor vehicles

996412 Taxi services including radio taxi & other similar services; 18

996413 Non-scheduled local bus and coach charter services 18

996414 Other land transportation services of passengers. 18

996415 Local water transport services of passengers by ferries, cruises etc 18

996416 Sightseeing transportation services by rail, land, water & air 18

996419 Other local transportation services of passengers n.e.c. 18

996421 Long-distance transport services of passengers through Rail network by Railways, 18

Metro etc

996422 Long-distance transport services of passengers through Road by Bus, Car, non- 18
scheduled long distance bus and coach services, stage carriage etc

996423 Taxi services including radio taxi & other similar services 18

996424 Coastal and transoceanic (overseas) water transport services of passengers by 18

Ferries, Cruise Ships etc

996425 Domestic/International Scheduled Air transport services of passengers 18

996426 Domestic/international non-scheduled air transport services of Passengers 18

996427 Space transport services of passengers 18

996429 Other long-distance transportation services of passengers n.e.c. 18

The author is a practising CA and is registered Insolvency Professional. He can be

reached at cavinodchaurasia@gmail.com , Mob. +91 9953587496.

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