GST on Tour and Travel in India: Everything You Need to Know
In India, the Goods and Services Tax (GST) has changed how businesses work in many areas, including the travel and tourism industry. Tour operators, travel planners, and even end users need to know what the GST means to follow the rules and provide services at a low cost. In this piece, we’ll discuss the most important parts of GST on tour and travel in India. These will include tax rates, input tax credits, applicable SAC codes, and more.
Travel Agencies under GST
GST is a single indirect tax that includes several state and national taxes, such as VAT, service tax, and luxury tax. GST makes taxation easier and clearer for businesses, where services like transportation, lodging, sightseeing, and food are often bundled together.
Since travel services are provided by many companies in many states, GST makes things more uniform and makes billing for cross-border services easier. If tour companies and travel agents make more than ₹20 lakhs a year (₹10 lakhs for NE and hill states), they have to sign up for GST.
The GST Rates on Tour & Travel ServicesÂ
a. Tour Companies
Some companies offer trips that include transportation, hotel stays, meals, and visits to sights. A 5% GST rate is used (without the Input Tax Credit).
Conditions: Tour companies can’t get an input tax credit (ITC) for goods and services that they use to run their tours.
Because of this special rate, tour companies are more likely to price their packages more cheaply for customers. But it also makes it harder to get back GST paid on things like hotel stays and transportation.
b. The tour operators
Booking a flight
- GST of 5% for economy class (no ITC)
- Business Class: 12% GST (you can get an ITC)
- Customers usually pay agents a service fee, which is subject to 18% GST.
Booking a hotel
When a travel agent gets a hotel room for a customer, GST is based on the room rate:
- ₹1000 tariff: not subject to
- ₹1001–₹7500: 12%–18%
- ₹7500 and above: 28%
As long as certain conditions are met, tour operators who bundle hotel stays into a package usually pay 5% GST on the whole deal, not just the rates at each hotel.
Transportation Services
- Rail tickets: 5% GST (usually included in the price of IRCTC tickets)
- Service on buses by the government or authorized operators: Exempt
- AC Bus or Contract Carriage: 5% GST (no ITC)
ITC for Travel Agencies under GST
You have to make a tough choice: either charge 5% GST and not get an input tax credit, or charge a higher GST rate (like 18%) and get an ITC on sales. If a tour company has to pay a lot for things like hiring AC buses, paying GST on hotel reservations, and guide fees, it may be better for them to choose higher GST with ITC. The 5% rate without ITC works better if the business plan is more service-based and fewer inputs need to be GST-paid.
Tour and travel service SAC codes
Under GST, the SAC (Services Accounting Code) is used to group travel services. Some important SAC codes are:
- 9985551 -which is a package tour service
- 998552 -Services for incoming tour operators
- 998553 -Services for outbound tour operators
- 998554 -Services for domestic tour operators
- 998555 -adventure or ecotourism
When you file your GST returns and send out bills, these codes are used.
GST Compliance Tips for Travel Agencies
Here are some legal tips to keep your business running smoothly and avoid fines:
- Make it clear what the GSTIN, SAC codes, and tax breaks are
- Make sure you file your monthly and quarterly taxes on time
- E-Invoicing (if needed): Companies that make more than 5 crore rupees in sales have to send out e-invoices
- Make sure that bookings and tax payments match up so that there are no problems during checks
Impact of GST on TravellersÂ
Due to the uniform application of GST, the cost of trip packages has gone up a little. But it has also made things clearer; tourists now know exactly how much tax they are paying. It’s also cheaper to bundle services under a 5% slab than to tax each service separately.
Get Started with TaxDuniaÂ
When GST was put into place, it gave the travel and tourist industry much-needed clarity and consistency. Businesses have to follow the rules and plan their taxes carefully, but it also makes things fairer for customers and gives them more information. Whether you run a small travel agency or a big tour company, you need to know how GST affects your services to set the best prices, build your reputation, and keep growing in this competitive field. Get started with TaxDunia
