GST Impact on the Travel Industry: The Indian travel industry has emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country

GST Impact on the Travel Industry

The taxable supplies for the travel industry are as follows:

  • (a) Inbound tour packages (domestic tour), whether sold to Indian resident or Foreign resident.
  • (b) Outbound tour packages (international tour) sold to Indian resident.
  • (c) Agency services.
  • (d) Passenger Transportation services (Sea, Land and Air Transport).

Some of the related taxable purchases in the Travel Industry which are subject to GST are as follows:-

  • (a) Hotel Accommodation;
  • (b) Transportation/ hire of vehicles /car hire;
  • (c) Tour package;
  • (d) Restaurant meals and dining places;
  • (e) Tickets for entry to exhibitions, entertainment venues;
  • (f) Hospitality (spas and resort);
  • (g) Agency commission;
  • (h) Booking Fees;
  • (i) Tourist Guide;
  • (j) Tour Deposit;
  • (k) Amendment Charges for Inbound/Outbound Tour Package and Domestic Air Ticket;
  • (l) Travel Insurance;
  • (m) Visa Service Fees; and
  • (n) Other related tourism services

Travel Insurance

Supply of travel insurance services for an inbound/outbound tour is taxed at applicable rates and the premium charged is subject to GST at 18%. The arranging of travel insurance for inbound or outbound tour is taxed at applicable rates and the commission charged for such a supply is subject to GST at 18%.

Air Ticketing Service Fee

  • Profit mark-up/service fee charged for domestic flight is subject to GST at 18%
  • Profit mark-up/service fee charged for international flight dis-embarking from India, is subject to GST at 18%
  • If any service fee charged separately, then it is subject to GST @ 18%.
  • Any commission received from airline is subject to GST @ 18%.

According to the CGST Law which neither contains the exemptions nor the rates of taxation, it appears that most of the services in relation to Tourism would be subject to levy of GST as the same is to be treated as ‘supply’. Since taxable event is supply, it is necessary to understand certain terms like Location of Supplier of Service, Location of Recipient of Service and Place of Supply. Tourism industry supplies bundle of services and hence Composite Supply and Mixed supply also comes into picture.

Tour Packages

Supply of Tour operator’s services are taxable at the rate of 5%. No input tax credit will be allowed when the rate of 5% is charged.


When supply is made to a registered person, GST of 5% will be charged depending upon the location of recipient of services i.e. Customer. Taxable invoice will be issued at the Customer’s registered address under GST.

When supply is made to an unregistered person, GST will be charged depending upon the location of Tour Operator. Bill of supply will be issued for the services rendered by Tour Operator.

The tour operator has to identify the nature of supply i.e. whether the tour package services are intra-state or inter-state, which in turn depends upon whether the recipient of service is registered or un-registered.

Key Issued Facing the Tourism Sector

High Multitude and Incidence of Taxes on account of taxation at multiple levels and absence of seamless input credit flow

  • Lot of business in this sector gets generated through online medium. Significant amount of clarity is required in the law to deal with e-commerce players and aggregators
  • Lack of Proper Infrastructure in terms of access, connectivity and services and many unorganised players in the industry
  • Non-availability of skilled & Semi skilled man power required for the industry to attract foreign tourist as well as promote local tourism specially Eco Tourism & Rural Tourism which lacks professional approach towards service and customer satisfaction
  • Lack of Marketing, Branding & Promotion efforts for the rural, cultural and Eco friendly remote locations and their conservations


Tourism Industry and travel and tour agents in particular are facing a tough time due to various factors like no commission by the airlines, direct marketing of airlines, higher taxation, poor tourist infrastructure etc. Their major sources of income are listed below:

  1. Commission from Airlines, Cruise Companies, Travel Insurance Companies and similar companies.
  2. Sale Tour Packages, both inbound and outbound
  3. Travel Related Services like Visa, Passport etc.

One has to understand that an airline or a cruise ticket or the travel insurance policy issued by insurance companies is a contract between the airline/cruise/insurance company and the passenger. The travel agent is only a facilitator who receives commission from the companies. Hence GST on these ticket/ policy will only be consumed by the passenger and the agent cannot use them as their input credit. However, the agent has to pay GST on the commission received from the airline/cruise/ insurance companies on the reverse basis.

If the agent collects Service Fee as an additional charge from the passenger and show it in the invoice separately, he can add GST on the service fee in the invoice and collect the same from the passenger


GST has been one of the most awaited tax reform for India. We would like to draw inference that high GST rates on hospitality may prove to be detrimental for the sector which is already reeling under the pressure of demonetisation and liquor ban on highways. However, liquor should have been included in GST to ensure the seamless credit for tourism industry. Since, players in this industry make the most of its consumption. The high incidence of taxes may make India less competitive when it comes to tourism as international tourists may skip the destination. The government should appreciate that countries like Myanmar, Thailand, Singapore, Indonesia and others levy taxes ranging from 5 to 10 per cent. India cannot afford to have these kind of complex and high GST. A lower tax rate for budget hotels sector will ensure that the industry’s quality upgrade continues while delivering standardized accommodation to millions of middle-classtravellers. People like consolidation of taxes as it leads to greater transparency and will help guests and buyers to understand the overall costs.

Companies specializing in food and beverages operations could be the biggest beneficiaries of GST within the hospitality sector. Food and beverages bills have multiple components and can inflate the bills by 30-35%. A single-slab tax will benefit consumers and should lead to savings of 10-15% on the overall bill.

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