Are you running a tour and travel business and unsure whether you need to register for GST? Or perhaps you’re someone who loves to travel and has noticed the term GST for Goods and Services Tax on your hotel bills, flight tickets, or holiday packages. GST affects the final cost of almost every travel-related service in India, including tour packages, accommodations, transportation, and ticket bookings. Under the Goods and Services Tax (GST) system, most travel-related services in India fall under two 5% or 18%. A 5% GST rate applies when the service provider chooses not to claim input tax credit (ITC). On the other hand, if the service provider opts to claim input tax credit, they are required to charge 18% GST on their invoices.
This blog will explain when and how GST applies to tours and travel services, as well as the rates charged for different components.
What is GST?
Goods and Services Tax (GST) is a single, uniform tax that replaced many different taxes in India (like VAT, service tax, and excise duty) from 01.07.2017. Instead of paying separate taxes on goods and services, now everything is taxed under GST. It applies to most goods and services, including travel and tourism. This means that when you book a tour package, hotel, or flight, GST is often added to your bill.
Who Pays GST on Travel?
- If you are a traveller, you pay GST as part of your travel bill.
- If you are a travel agent or tour operator, you are responsible for collecting GST from your customers and paying it to the government.
How Much GST is Charged on Travel Services?
The amount of GST charged depends on what kind of travel service is being offered, and how it is being offered:
1. Tour Packages (domestic and international)
A tour package usually includes transport, hotel stay, sightseeing, and other services. For example, if you book a 5-day Goa package with hotel, transport, and activities included, it falls under this category.
GST is charged:
- 5% GST: If the tour operator is not claiming tax benefits, the Input tax Credit, they can charge only 5% GST. This is a common option as it keeps the cost low for customers.
- 18% GST: If the operator wants to claim tax credit on their expenses, such as hotel bookings or vehicle hire, they can charge 18% GST.
Example:
You book a tour package worth ₹50,000.
- If the operator charges 5%, GST = ₹2,500.
- If they charge 18%, GST = ₹9,000.
The tour operator chooses which rate to apply based on their business setup.
2. Flight Bookings
Travel agents who book flight tickets charge GST only on their commission, not the full ticket price.
- Domestic Flights: 18% GST is applied on 5% of the base fare.
- International Flights: 18% GST is applied on 10% of the base fare.
The actual airline tickets are usually already taxed by the airline, so agents are only taxed on their margin.
3. Hotel Bookings
If a travel agent or company books a hotel room on your behalf, the GST depends on the room rate:
- Room Rent less than ₹1,000/day: No GST.
- ₹1,001 to ₹7,500/day: 12% GST.
- More than ₹7,500/day: 18% GST.
Some operators may charge a flat 5% on hotel bookings if they don’t want to claim tax credit.
4. Cab/Taxi Services
- Self-owned cabs (not rented): 5% GST, without tax credit.
- Cabs arranged through a platform or as part of a package: It can be 5% or 18%, depending on the arrangement.
5. Visa and Travel Insurance
- Services like helping customers with visas or buying travel insurance are charged 18% GST.
Inbound, Outbound, and Domestic Tours
1. Domestic Tour
If a package is offered for destinations within India, such as Delhi to Manali, the GST is charged in India. The tour operator can choose 5% or 18% GST depending on ITC.
2. Inbound tour (for foreign tourists in India)
If a foreign tourist books a tour in India through an Indian operator, it is treated like a domestic tour. GST is applied normally at either 5% or 18%; the rationale of the client is immaterial.
3. Outbound tour (for Indians going abroad)
When an Indian tourist books an international package (like a 6-day Europe tour), GST is still charged by the Indian tour operator. The same rate5% or 18%, applies.
Special Rule for Mixed Tours (India + Foreign)
If a foreign tourist books a tour that includes both Indian and foreign destinations, for example, 3 days in Delhi and 4 days in Bhutan.
In such cases, the government provides a partial GST exemption for the portion of the trip that takes place outside India.
- The operator doesn’t have to charge GST on the foreign part of the tour.
- But they must calculate the exemption correctly. Only up to 50% of the total tour value, or the proportion of foreign days (whichever is less), is exempt.
Example:
Total tour cost: ₹1,00,000
Days in India: 3, Days abroad: 4
Foreign portion = 4/7 = approx. 57% = ₹57,000
But only 50% (₹50,000) is exempt. The rest (₹50,000) is taxable.
Do Travel Agents Need GST Registration?
Yes. If a travel agent or tour operator is earning:
- More than ₹20 lakhs a year (or ₹10 lakhs in some small states), they must register for GST.
- Even if they make less than that, but deal in interstate services (between two states), GST registration is mandatory.
Once they are registered with the GST, they must charge GST on their invoices and submit returns monthly.
Billing and Invoicing Rules
If you are a tour operator, your bill must include:
- Full package amount.
- GST charged (5% or 18%).
- Type of service (tour, hotel booking, air ticket, etc.).
- Place of supply (to identify whether it’s interstate or intrastate).
- Client type (Indian or foreign tourist).
This helps both customers and the tax department know how GST is being applied.
Can Tour Operators Claim Input Tax Credit (ITC)?
Yes, they can, but only if they charge 18% GST.
Input Tax Credit (ITC) means that the operator can reduce their tax bill by claiming credit for the GST they have already paid on services such as hotel rooms, transport vehicles, and guide charges.
If they choose to charge only 5% GST, then they are not allowed to claim The Input Tax Credit.
Conclusion
Like any other service, GST is charged on tours and travel. GST has brought more transparency to travel pricing in India, but we cannot ignore the fact that it can be confusing if you’re not familiar with tax terms. For travellers, it is important to understand why extra charges appear on your bill. For tour operators and agents, it is crucial to select the correct GST rate, register properly, and maintain accurate records.
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