Simplifying GST on Tours and Travels for Indian Agencies

India’s booming travel industry is a thriving part of the service economy, with countless travel agencies and tour operators offering curated experiences across the country. However, with the introduction of the Goods and Services Tax (GST), travel businesses have had to adapt to a new tax structure. Understanding how GST works, particularly in the context of bundled offerings like tour packages, is crucial for compliance and cost efficiency. This guide breaks down the essentials of GST on Tour Package and its implications for Indian travel agencies.

Overview of GST fosr the Travel Sector

GST replaced multiple indirect taxes with a single, uniform tax structure, simplifying business operations across sectors. For the travel industry, GST has had a significant impact, especially for services involving composite supplies. These include hotel bookings, transportation, meals, and sightseeing—commonly offered as part of a package deal.

Tour operators and travel agencies must understand how GST applies to these bundled services to invoice correctly, determine the appropriate tax rate, and ensure eligibility for input tax credits.

Defining a Tour Package Under GST

A tour package is typically a pre-arranged combination of services such as:

• Accommodation
• Transportation (flights, buses, car rentals)
• Meals and refreshments
• Sightseeing and local tours
• Travel insurance and guides

Under GST, these offerings are treated as composite supplies, where one main element—called the principal supply—determines the applicable GST rate. This classification is crucial in defining the correct tax treatment for services marketed under a GST on Tour Package.

GST Rates Applicable to Tour Operators

The GST Council has prescribed two major slabs for travel service providers:

5% GST (Without Input Tax Credit)

• Tour operators who choose this option cannot claim Input Tax Credit (ITC).
• Ideal for operators with fewer business-related expenses or simpler travel offerings.

18% GST (With Input Tax Credit)

·       This rate allows the operator to claim ITC on purchases and services used for providing the tour package.

• Suitable for businesses dealing with high-volume or high-value packages.
• Agencies should assess which structure aligns better with their cost model and customer pricing preferences.

GST on Inbound and Outbound Tours

Tourism services may be categorized into domestic, inbound, or outbound services:

• Domestic Tours: GST is applicable as per Indian GST rules depending on the package structure.
• Inbound Tours (for foreign tourists visiting India): These are treated as taxable services in India.
• Outbound Tours (Indian clients traveling abroad): Services provided to Indian residents for foreign travel attract IGST (Integrated GST).

In all cases, understanding the place of supply becomes essential for determining whether CGST/SGST or IGST is applicable.

Place of Supply and Tax Liability

The location of the service recipient, supplier, and place of service execution helps identify whether the transaction is inter-state or intra-state:

• Intra-state supply: CGST + SGST applies.
• Inter-state supply: IGST applies.

For instance, a Delhi-based agency offering a Rajasthan tour to a client in Mumbai would fall under inter-state supply.

HSN Code for Travel Services

Tour operators must use appropriate classification for GST compliance. The Harmonized System of Nomenclature (HSN) code for tour operators and travel arrangement services is:

• HSN Code 9985 – Travel arrangement and related services

Using the correct HSN code ensures smooth GST return filing and reduces the risk of penalties.

Invoicing for Tour Packages

Invoices must be GST-compliant and clearly mention:

• GSTIN of the service provider
• Description of the services offered
• GST rate and amount
• HSN code
• Total taxable value

Travel agencies must issue either a tax invoice (when charging GST separately) or a bill of supply (for inclusive pricing or under the 5% scheme).

Understanding Input Tax Credit (ITC)

Agencies opting for the 18% GST scheme can claim ITC on:

• Booking platforms
• Accommodation vendors
• Vehicle hire
• Tour guides or local facilitators

This can significantly reduce the effective tax burden. However, ITC is not available under the 5% GST regime.

Practical Scenario: GST on Tour Package

Suppose a travel agency offers a ₹60,000 package that includes hotel stays, meals, transport, and sightseeing. If the principal supply is accommodation, the entire package will be taxed based on the rate applicable to hotel services.

If the agency has opted for the 18% regime, it can claim ITC on services like vehicle rentals and third-party meals, potentially saving on costs.

Being aware of how GST applies to such bundled offerings is essential for structuring packages competitively.

GST Registration Criteria for Travel Agencies

An agency must register under GST if:

• Annual turnover exceeds ₹20 lakhs (₹10 lakhs in certain states)
• Services are provided across state borders
• The agency wants to claim ITC

Voluntary registration is also allowed and beneficial for small or new agencies aiming to work with GST-registered vendors.

Key Compliance Tips

• Maintain accurate and itemized invoices
• Keep vendor GSTINs updated for ITC eligibility
• Track tax returns and deadlines
• Avoid mixing GST-inclusive and exclusive pricing in a single invoice

A clear understanding of GST on Tour Packages and its correct implementation not only ensures legal compliance but also builds trust among clients and vendors.

Conclusion

GST compliance is not just a tax obligation but a business advantage for travel agencies in India. From understanding composite supplies to making informed choices about tax rates and ITC, knowing the intricacies of GST on Tour Package can help agencies streamline operations and increase profitability.

By keeping GST considerations at the core of package design, pricing, and vendor contracts, travel businesses can ensure smoother workflows and long-term sustainability. Partnering with a Chartered Accountant can provide further clarity and help businesses avoid costly mistakes in the ever-evolving regulatory landscape.