A guide to compute GST correctly

Chartered Accountant and expert on travel agent accountancy, Manish Gadia, shares comprehensive guidelines on how they must calculate GST when they are billing their clients. This article delves into the various facets of GST as it pertains to travel agents, ranging from billing practices to Input Tax Credit (ITC) utilisation.

GST is a destination-based consumption tax levied on the supply of goods and services. The GST rates are structured into different slabs ranging from 5 per cent to 28 per cent, with specific exemptions and lower rates for essential services.

Tour operator with tour packages: Many travel services are bundled into comprehensive packages that include multiple components, such as flights, hotels, transfers, visa, meals and sightseeing. Here total booking is done by the tour operator and the total fees charged shall include his margin. So, the Tour Operator becomes service provider, and in turn, he receives services from various other counterparts like airlines and hotels.

Tour operator with individual services: The tour operator only facilitates the transaction and helps traveller to identify various suppliers as per their requirements and arrange for its booking. Payment flow goes straight away from actual traveller to end service provider and tour operator only charges for its service portion from traveller. This means, where travellers purchase one or two specific services without opting for a bundled package, travel agents bill these services separately.

As per above mentioned heading  (in box) 998552, the rate of GST would be 5 per cent IGST if it is interstate supply or 2.5 per cent CGST + 2.5 per cent SGST/ UTGST if it is intra-state supply and for the sale of packages if following conditions are met:

• Input Tax Credit on services availed by the entity will not be available. However, Input Tax Credit on the services taken from other tour operators are allowed.
• The entity shall indicate in its invoice that the amount charged is gross amount and inclusive
  of charges of accommodation and transportation.

However, Tour operators can-

• Not claim ITC on services like tickets purchased from airlines, railways, cab service or other transportation providers, hotel accommodations including meals, or any office expenses incurred such as rent and stationery.
• Claim ITC on tour packages purchased from other tour operators.

On the other hand, the entity may charge GST at the rate of 18 per cent IGST or 9 per cent CGST + 9 per cent SGST/ UTGST on the total amount as per the type of transaction. In that case, the entity will be eligible to take all Input Tax Credit like rent, professional fee, lease line and telephone on the services that the entity acquired for providing the underlined services i.e. Tour Operating. Following are some examples on which travel agents can claim ITC on various inputs including:

• GST paid on tickets purchased from airlines, railways, or other transportation providers, including on rent a cab service.
• GST paid on hotel accommodations booked for customers including meals.
• GST paid on tour packages bought from tour operators.
• GST paid on office expenses, such as rent and stationery used for providing services.