GST on Tours and Travels: HSN Code and GST Rate on Travel Agents Services

Depending on whether input tax credits (ITC) are available, there are now two separate rates of GST on tours and travels. Without the option of an ITC, a 5% GST is applied to the gross tour price, while an 18% GST rate is applied with ITC. These various rates have an impact on the total pricing for both travellers and tour operators.

Continue reading to learn more about tours and travels HSN code, and GST on travel agents.

Scope of taxation on tours and travels 

The Goods and Services Tax (GST) regulations provide tour operators with three different ways to operate and claim input credits. Input tax credit (ITC) in GST refers to the tax amount that businesses can subtract from the tax owed on the purchase of goods and services.

Here is a detailed explanation:

• Acts as a tour operator with no ITC: A tour operator charges 5% GST to the customer on the total package but does not claim any ITC. 
• Acts as a tour operator and claim ITC: The tour operator charges 18% GST to the customer on the total package and claims ITC. Although, it is important to consider the place of supply rule when claiming ITC. 
• Acts as a pure agent: The tour operator acts as an intermediary and raises an invoice to the customer charging 18% GST. However, the entity's role is that of a facilitator, and the actual expenses incurred for services like travel, hotel, and boarding are separately mentioned on the invoice and taken as reimbursements from the customer. The tour operator must maintain proper records of these expenses.

Value of supply for GST on tours and travels

If a tour operator works as a pure agent, then they can exclude the expenses incurred by the service provider from the value of their supply. This allows for a more accurate determination of the tax liability and ensures that the tax is levied only on the actual service provided by the pure agent.

Time of supply for GST on tours and travels

The time of supply for GST depends on whether the tour operator is acting as a pure agent or not. 

If they are not acting as a pure agent, the GST should be charged and paid at the time of payment or issuance of the invoice, whichever occurs earlier. In such cases, the tour operator should recognise its revenue on a payment basis for GST purposes.

However, if the tour operator opts to act as a pure agent, the GST should be charged at the time when the final invoice is raised or when the commission is received, whichever happens, earlier. 

Place of supply for GST on tours and travels

When making a hotel reservation, the place of supply is the city in which the hotel is located, and the hotel will include GST in its invoice. However, the company cannot claim ITC on that specific invoice if it is not registered for GST in the place of supply.

The same applies to flight tickets, where the place of supply is the place of flight departure. If the tour operator is not registered under GST in the state from which the flight departs, ITC cannot be claimed for that invoice.

GST on tours and travels with HSN code

Under Heading 9985 of the GST Tariff Act, the applicable GST rate for tours and travel services is 5% if the following conditions are met. 

• The tour operator providing the services will not be eligible for ITC on services like hotels, air tickets, etc. However, ITC can be claimed on tour operator services obtained from another tour operator.
• The tour operator must indicate in its invoice that the charged amount is the gross amount and includes charges for accommodation and transportation.

Here is a tabular representation of tours and travels SAC code and GST on travel agents’ services:

Availability of ITC claims on tours and travels GST rate

In case the tour operator chooses to charge GST at the rate of 18% on the total amount, it will be eligible to claim ITC on various services such as rent, professional fees, lease lines, telephone, etc.

Here is a more detailed explanation of ITC availability on tours and travels GST rate:

• Air travel agents can claim ITC on the GST paid for commission or service charges.
• Inbound tour fees charged on a commission basis are subject to 18% GST with ITC.
• ITC can be claimed if the service is outsourced from another agent.
• Hotels charging a commission will have 18% GST applicable, and ITC can be claimed.
• All other renting services are charged at 18% GST, with ITC

Frequently Asked Questions

• Can air travel agents avail for ITC?

Yes, air travel agencies are eligible for an ITC on the GST they paid on the commission they got from passengers or travellers.

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

Yes. According to section 9(5) of the CGST Act, all cab-service companies are required to pay GST.  

• Is a tour operator taxable?

          Tour operators are considered ‘people’, but the brokerage charged by them is taxable. 

• How much GST is on a flight ticket?

The GST on economy flight tickets is 5%, whereas that for business and premium economy is 12%.