GST on Travel Agents & Tour Operators

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:

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 travel Agent	Location of the recipient (Pax)	Place of supply for the Air Travel Agent	Tax to be charged by the Air Travel Agent
Delhi	Delhi	Delhi	CGST/SGST
Gurgaon (Haryana)	Delhi	Delhi	IGST

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

Location of Air travel Agent	Location Of the Airlines	Place of supply for the Air Travel Agent	Tax to be charged by the Air Travel Agent
Delhi	Delhi	Delhi	CGST/SGST
Delhi	Gurgaon ( Haryana)	Gurgaon ( Haryana)	IGST
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.

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

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 of Agent		Location of the Pax (address for Billing to pax)	Location of the Hotel/ Cruise	Place of supply for the Agent			Tax to by charged by the Agent
Maharashtra		Maharashtra	Gujarat	Maharashtra			CGST/SGST
Maharashtra		Delhi	Gujarat	Delhi			IGST
Maharashtra		USA	Gujarat	Gujarat (location where service is actually performed)			IGST
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 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 Agent	Location of the Pax/ Agent	Location of the place where car is to be used	Place of supply for the Agent	Tax to be charged by the Agent
Maharashtra	Maharashtra	Gujarat	Maharashtra	CGST/SGST
Maharashtra	Delhi	Gujarat	Delhi	IGST
Maharashtra	USA (Foreign person)	Gujarat	Maharashtra	CGST/SGST

GST applicable for renting of motor vehicle shall be @ 5% with no ITC or 12% with ITC.

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 Agent	Location of the Foreign Railway Company	Place of supply for the Agent	x to be charged by the 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 Agent	Location of the Pax	Place of supply for the Agent	Tax to be charged by the Agent
Maharashtra	Maharashtra	Maharashtra	CGST/SGST
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 from or to Indian Rupees (INR)		Value shall be difference between the Buying or selling rate and RBI reference rate, multiplied by total units of currency
If in relation to the above case, RBI reference rate is not available	Value shall be 1% of gross amount of INR provided or received by the person changing the money
If neither of the currencies exchanged in INR	Value shall be 1% of lesser of two amounts by converting any of the two currencies into INR

Option B

Gross Amount of Currency Exchanged	Value to be considered for Supply of Service
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. 10,00,000	Rs. 1,000 + 0.5% of Gross amount of currency Exchanged
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 CODE	Particulars of Services	Rate of Tax
9964	Transport of passengers, with or without accompanied belongings, by – (a) air, 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.	Nil
9964	Services provided to the Central Government, by way of transport of passengers 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.	Nil
9964	Service of transportation of passengers, with or without accompanied belongings, 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).	Nil
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 motorcab; (b) air conditioned stage carriage; (c) radio taxi	5 – No 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 Connectivity Scheme Airport	5 – with 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, tramway, autos, three wheelers, scooters and other motor vehicles	18
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, Metro etc	18
996422	Long-distance transport services of passengers through Road by Bus, Car, non-scheduled long distance bus and coach services, stage carriage etc	18
996423	Taxi services including radio taxi & other similar services	18
996424	Coastal and transoceanic (overseas) water transport services of passengers by Ferries, Cruise Ships etc	18
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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