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Starting a Travel Agency in India – A Complete Guide

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Last Updated on October 25, 2023 by Divya

 Starting A Travel Agency In India 

Tourism and travel hold a prominent position within India’s economy, creating substantial employment opportunities. According to the UN World Tourism Organization (UNWTO), the travel and tourism sector contributes between 6-7 percent of total global employment.

Tourism directly benefits the hospitality and travel sectors. It has a positive ripple effect on ancillary industries like food manufacturing, services, construction, and foreign exchange earnings while contributing to employment, income, and foreign currency inflow into the country.

Beginning with India’s iconic attraction, the Taj Mahal, the country offers a multitude of destinations that every individual should experience at least once in their lifetime. This makes India a highly appealing destination for both domestic and international tourists.

Various Indian states, including Goa and the northeastern regions, heavily rely on tourism as their primary source of revenue. Additionally, major cities such as Delhi, Bangalore, and Mumbai have undergone significant cosmopolitan transformations due to the steady influx of international tourists.

Considering all these factors, it is evident that tourism has become an indispensable contributor to the overall revenue of the country. However, it’s important to acknowledge that thriving in the tourism industry is a challenging endeavour, and commencing a travel agency involves a series of intricate steps and processes.

Choice of Business Entity

Travel agents today have a range of business entity options to select from, and the choice largely hinges on their business plan. Many travel agents opt for the Private Limited Company structure, which is widely recognized in India and comes with a slew of advantages. This option is particularly well-suited for entrepreneurs aiming to offer their services online and rapidly expand their business by harnessing the power of the Internet.

Alternatively, there are relatively recent business entities like Limited Liability Partnership (LLP) and One Person Company (OPC), which may be more fitting for those looking to gradually develop their business or operate part-time. LLPs, for instance, don’t require an audit unless the turnover exceeds Rs. 40 lakhs in a year, making them suitable for entrepreneurs gaining firsthand experience in their ventures. OPCs, on the other hand, are ideal for sole proprietors who wish to minimize extensive compliance requirements and maintain a simpler structure.

In both cases, what’s common is the selection of a business entity that provides limited liability protection and establishes a separate legal identity for the travel agent’s business.

Moreover, entrepreneurs have the option of a proprietorship with a trademark, which can be useful when a unique brand name is desired, but it cannot be registered with the Ministry of Company Affairs due to naming guidelines. This allows entrepreneurs to safeguard their brand while choosing a different business structure that aligns with their specific needs and goals.

GST Registration for Travel Businesses

In the context of travel businesses, business owners must undergo GST registration. This enables them to collect GST (Goods and Services Tax) from customers for the services rendered by the business.

Under GST, the tax payable by Air Travel Agents is as follows:

  • For commission income earned from airlines when booking domestic air tickets, GST is charged at a rate of 18% on 5% of the basic fare.
  • For commission income generated from airlines for booking international air tickets, GST is levied at an 18% rate on 10% of the basic fare.
  • Processing or service fees for booking tickets for customers attract a GST rate of 18% based on the invoice from the air traveller.

Trademark Registration for Travel Businesses

Entrepreneurs in the travel industry who aim to establish a distinct identity through a unique name and symbol have the option to achieve this by registering their business as a trademark. This process is governed by the Intellectual Property Rights laws in India and provides legal protection for their brand identity.

Structuring Your Travel Agency Business: Key Choices and Considerations

When starting a travel agency, business owners can choose from several business structures. These options are adaptable and can be customized to suit the tastes of the business owner. The numerous government subsidies and incentives that travel agencies can obtain drive many entrepreneurs to choose to establish their businesses as private limited companies.

If you would rather take your time building your travel company, a limited liability partnership (LLP) might be the best option. It’s crucial to remember that providing online services might not be possible in this situation. This restriction needs to be carefully considered, given the Internet’s role in expanding the tourism sector.

Entrepreneurs can register a trademark under India’s intellectual property rights rules to give their travel firm a unique name and logo.

GST Taxation for Travel Agents

For travel agents, GST (Goods and Services Tax) registration becomes mandatory when their annual turnover exceeds ₹20,00,000. However, if the travel agency operates in different states, the threshold for mandatory GST registration is reduced to ₹100,000. It’s important to note that the ₹200,000 threshold doesn’t apply when the travel agency is involved in taxable inter-state transactions. In such cases, GST registration is required regardless of the turnover amount.

The table provides a list of SAC (Services Accounting Code) for various services offered by travel agents for their outward supply:

Service

SAC Code

Reservation of accommodations, cruises, tour packages, etc 998552
Reservation of convention centres, congress centres exhibition halls etc 998553
Reservation of event tickets, cinemas, entertainment, and other recreational services 998554
Reservation of transport services 998551
Reservation of tour operator services 998555
Other travel arrangements and related services 998559
Travel insurance & freight insurance services 997136
Tourist guide service 998556
Visitor information and tourism promotion services 998557
Provision of wholesale trade services on a fee/commission or contract basis 996111
Retail trade services, provided on a fee-based or commission-based basis 996211

How to become a Government-Approved Trade Agent?

Becoming a government-approved trade agent involves meeting specific criteria related to capital investment, the size of your agency’s workforce, and office space. To achieve recognition as a trade agency, it’s crucial to adhere to these requirements.

The process typically entails applying, following a designated format, to the Ministry of Tourism. A recognized travel agency should sponsor this application. While official registration might not be compulsory, it is highly advisable to seek recognition as a trade agency rather than operating as an unrecognized agent.

Furthermore, it’s important to note that the government actively promotes these recognitions. This support is aimed at upholding a consistent and high standard in the services provided by these agencies. In essence, becoming a government-approved trade agent involves satisfying specific criteria and engaging with the formal recognition process, which is encouraged to maintain service quality standards.

IATA Agent

IATA,” short for the International Air Transport Association, is a global organization that represents approximately 84% of all airlines worldwide. This influential association offers a range of training materials and resources to travel agencies falling under its jurisdiction.

Becoming a member of IATA is highly recommended for travel agencies, and it offers numerous advantages. For travel agencies dealing with international travel packages, IATA membership is particularly significant. This affiliation provides substantial discounts on air services on a global scale, making it a valuable resource for both the agency and its customers. Essentially, joining IATA is not just beneficial but often essential for travel agencies looking to thrive in the international travel market.

The most important thing to remember is that India ranks 12th in the world for the amount that travel and tourism contribute to the country’s GDP. Furthermore, this industry is expected to increase at a 7.8% annual rate between 2013 and 2023. This emphasizes how important tourism is to the growth of India’s economy. The Indian government has implemented several subsidies and incentives to assist nascent ventures in the travel agency sector in recognition of this noteworthy contribution. These policies aim to promote and facilitate the travel agency industry’s expansion, attracting new companies and entrepreneurs to enter this lucrative market.

Conclusion

Kanakkupillai, an online platform specializing in business registration, compliance, and taxation services in India, extends comprehensive support to travel businesses seeking GST registration and trademark registration.

For GST registration, Kanakkupillai provides tailored guidance, helping travel entrepreneurs comprehend their specific GST obligations within the travel industry’s context. The platform also offers invaluable assistance in assembling and organizing the requisite documents, ensuring precise compliance with regulatory standards. Moreover, Kanakkupillai manages the submission of GST registration applications to relevant government authorities, ensuring a seamless and timely process. Ongoing compliance support is integral, encompassing assistance with GST return filings and addressing compliance-related queries and concerns.

In terms of trademark protection, Kanakkupillai conducts thorough trademark searches to confirm the uniqueness and eligibility of desired brand elements for travel businesses. They simplify the trademark registration process, managing paperwork and submissions accurately. Furthermore, the platform ensures legal protection for brand identities, guiding entrepreneurs in safeguarding their intellectual property rights. Kanakkupillai also offers support for trademark renewals, making it a hassle-free process.

Leveraging Kanakkupillai’s services empowers travel businesses to streamline GST registration, secure their brand through trademark registration, and maintain both legal compliance and brand integrity. This allows business owners to save time and effort while concentrating on the growth and success of their travel enterprises.

Divya

Telecom engineer turned content creator with a knack for crafting compelling narratives. Experienced in client management and community engagement, and ventured into freelance content creation, contributing tailored and impactful content across diverse industries. Currently, collaborating with companies like Kanakkupillai, dedicated to delivering inspiring technical content rooted in a solid foundation.