GST on Domestic & International Tours: Key Rules Every Traveller Must Know

GST Implications on Domestic and International Tours: What travellers and companies must know this season

1. Introduction

With the onset of the winter season and the approach of the New Year, many individuals and companies begin planning trips both within India and abroad. While families look forward to vacations, corporates increasingly organise domestic and international tours for employees as part of incentive programmes, annual meets, team outings, and reward schemes.

As travel activity surges during this festive period, it becomes essential to understand the GST-related rates, tax obligations, and cost implications associated with such tours. Awareness of these aspects helps both individuals and organisations plan more effectively and avoid unexpected financial burdens.

Whether the travel is for leisure, corporate off-sites, conferences, or incentive programmes, the GST framework plays a significant role in determining overall pricing, input tax credit eligibility, and compliance responsibilities. This article provides a clear, practitioner-friendly analysis of GST implications on domestic and international travel during the winter and New Year season, ensuring informed decisions and smoother compliance.

GST Rates Snapshot

2. GST Rates applicable to Domestic Travel

Domestic tour packages generally comprise hotel bookings, transport, meals, and activity arrangements. Under GST, the following rate structure applies when organizing a trip within India:

2.1 Tour Operator Services

As per Section 2(119) of the CGST Act, 2017:

“Tour operator” means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing, or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

This broad definition covers entities arranging complete tour packages or specific components such as hotel bookings or sightseeing itineraries.

Nature of Supply

When an Indian tour operator arranges a tour within India, the supply is treated as a taxable supply of services within India. This applies irrespective of whether the recipient is:

• An individual tourist, or
• A corporate entity sponsoring tours for its employees.

 Applicable GST Rates

Tour operator services are taxable at the following rates:

In practice, most tour operators opt for 5% GST without ITC, as it results in a lower outward tax burden and competitive pricing. GST is charged on the entire tour package value, including accommodation, transport, meals, and sightseeing.

2.2 Hotel stay

Hotel GST is levied based on the value of supply:

• 5% [Budget Hotels (≤ ₹7,500 per room/night)] or
• 18% [Premium Hotels (> ₹7,500 per room/night)],

2.3 Domestic Air Travel and Transport

• Economy air travel is taxed at 5%
• Business class at 18%
• Bus/Rail transport through aggregators may attract 5% or 18% or be exempt, depending on the model.

2.4 Food

• 5% at standalone restaurants
• 5% or 18% at restaurants where accommodation is also provided

√ Hotel room price ≤ ₹7,500/day → Restaurant services taxed at 5%

√ Hotel room price > ₹7,500/day → Restaurant services taxed at 18%

2.5 GST Treatment of domestic tour packages

When sold as a single composite package, the GST rate is applied based on the principal supply, usually the tour operator service. This often results in an effective 5% GST even when the package includes higher-rated supplies such as hotel stays.

3. GST Treatment of International (Outbound) Travel

Winter travel often includes outbound destinations such as Europe, Thailand, Dubai, or other international locations, sometimes combined with domestic legs.

Outbound travel is where GST becomes particularly interesting because services are partly performed outside India. An overseas tour package is not a single service but a composite supply, generally comprising:

• Booking of international air tickets
• Hotel accommodation outside India
• Sightseeing, excursions, and local transportation abroad
• Tour planning, coordination, and on-ground arrangements

Although services are consumed outside India, the GST treatment depends on the location of the supplier and recipient.

3.1 What Is Taxable?

When an Indian tour operator provides an international tour package to an Indian customer:

• The place of supply is generally the location of the recipient in India.
• GST is leviable in India, even though the tour is performed abroad.
• Payments made directly to foreign hotels or service providers are outside Indian GST. However, when these costs are bundled and billed by the Indian tour operator, GST applies on the gross package value charged to the customer.

4. GST and Place of Supply for Tour Operator Services: – Indian Tourists

However, determining the place of supply under GST for tour operator services often creates interpretational difficulties, especially when services are provided to foreign tourists visiting India or for outbound tours abroad. Let’s analyse the statutory provisions and practical implications of the place of supply rules governing tour operator services under the Integrated Goods and Services Tax (IGST) Act, 2017.

Determination of the place of supply is central to GST liability.

• Section 12 applies where both supplier and recipient are located in India.
• Section 13 applies where either the supplier or recipient is located outside India.

Thus, identifying the location of the supplier and the recipient is crucial before determining which section applies.

4.1 Services to Indian Tourists (Domestic Packages)

When a tour operator in India provides a tour within India to an Indian tourist, the GST treatment is straightforward and settled. Since both parties are located in India, section 12 governs the place of supply. Since there is no specific entry for tour operators, the Place of supply shall be determined as per the default rule u/s 12(2).

Example:

1. An Andhra Pradesh tour operator sells a Himachal package to an Andhra Pradesh tourist.

→ Place of supply = Andhra Pradesh (location of recipient)

→ GST = CGST + SGST.

2. A Rajasthan tour operator sells a Kerala tour package to an individual resident of Gujarat.

→ Location of supplier ≠ Place of supply

→ Place of supply = Gujarat

→ GST = IGST

4.2. Services for Outbound Tours (Foreign Destinations)

When an Indian tour operator organizes a tour conducted entirely outside India (e.g., a Thailand or Dubai package), the service pertains to travel performed outside India. From a GST perspective, these transactions require careful analysis because the customer is in India, while services are performed outside India. Since both the supplier and recipient are located in India, Section 12 of the IGST Act applies.

So, irrespective of the travel place, in any case, the place of supply falls in India.

 Whether such supply qualifies as Export of Services

> Under Section 2(6) of the IGST Act, a service qualifies as an export only if all conditions are satisfied. In the case of outbound tours provided to Indian tourists:

• • The supplier is located in India – Yes
  • The recipient is located outside India – No
  • Place of supply is outside India – No

Since the recipient (Indian tourist) is located in India, the supply does not qualify as export of services, even if:

• The tour is conducted entirely outside India, and
• Payment is received in foreign currency.

> If the tour is provided to a foreign tourist and payment is received in foreign exchange, it may qualify as an export of services because

• • Supplier is in India
  • Recipient is outside India.
  • Service is provided outside India.
  • Payment received in convertible foreign exchange.

Place of Supply – Tour Operator Services

5. Corporate Travel and ITC Implications during the season

Companies often plan off-sites, dealer meets, conferences, and incentive travel in winter. GST implications vary depending on the purpose of travel. Under GST, Input Tax Credit (ITC) eligibility for off-sites, conferences, dealer meets, and incentive travel is determined by:

• Section 16(1) – Whether the expense is incurred in the course or furtherance of business
• Section 17(5)(b) – Whether the expense is blocked as personal consumption/employee welfare

Hence, GST implications vary depending on the purpose of travel, not merely because it is a corporate event.

5.1 When ITC is allowed

• Travel for business meetings or client work
• Corporate conferences and training programmes
• Foreign travel for official business

5.2 When ITC is blocked

Section 17(5) blocks ITC when:

• Travel is for personal consumption
• It forms part of an employee’s employment contract or perquisites
• Travel is purely leisure-oriented, such as annual outings or rewards unrelated to business

Winter corporate off-sites require careful documentation to demonstrate business nexus.

6. Practical Case Illustrations

 Case 1: Corporate Strategy Offsite in Goa (ITC Eligible)

A Company organizes a 3-day corporate strategy offsite in Goa for its senior management team.
The tour operator charges a single consolidated price covering accommodation, conference hall, working meals, and logistics. GST at 5% is charged on the tour operator service.

If the offsite is supported by formal agendas, meeting schedules, and training sessions, the expenditure is incurred in the course or furtherance of business.
Accordingly, ITC may be claimed, subject to documentation proving the business nexus and absence of leisure activities.

Case 2: Corporate Offsite in Goa – Employee Leisure Trip (ITC Not Eligible)

A company books a 3-day corporate offsite in Goa described as a “team outing”.
The package includes sightseeing, beach activities, and leisure stay. The tour operator charges a single package price. GST at 5% applies on the tour operator service.

Since the travel is primarily for employee recreation and personal consumption, and no structured business activity is demonstrated, ITC is blocked under Section 17(5)(b).

Case 3: Winter Vacation Package – Europe

A company rewards top-performing employees with a European winter vacation package booked through an Indian tour operator at a single consolidated price. GST is charged at 5% on the tour operator service. Since the trip is a performance reward and leisure benefit, the expense is treated as personal consumption.

Accordingly, ITC is not available under Section 17(5).

7. Conclusion

The winter and New Year travel season brings a surge in both domestic and outbound movement, making GST considerations particularly relevant for travellers, tour operators, and corporates. Understanding GST rates, place-of-supply rules, margin-based valuation, and ITC eligibility is essential to avoid inflated costs and ensure compliance. With clear documentation and informed structuring, businesses can navigate the tax landscape effectively and optimise travel expenditures.

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Disclaimer – The views expressed in this article are personal. Any suggestions or feedback can be sent to dineshrepalli@hnaindia.com