GST UPDATE
Desk of CA. Praveen Sharma
Series- 509
Goods and Services Tax (GST) is applicable on various goods and services in India, including inbound tour packages. Here’s an overview of GST on inbound tour packages:
1. Definition:
Inbound tour packages involve arranging travel, accommodation, and other services for foreign tourists visiting India.
2. GST Rate:
- The GST rate for tour operator services is 5% without the benefit of Input Tax Credit (ITC).
- If the tour operator opts to claim ITC, the applicable rate is 18%.
3. Valuation:
- The value of the service is the gross amount charged for providing the tour operator service.
- Any amount charged towards arranging tours, accommodation, and other services is included in the taxable value.
4. Place of Supply:
- For inbound tour packages, the place of supply is considered to be in India, as the services are performed within India.
5. Reverse Charge Mechanism (RCM):
- If the inbound tour operator receives any services from a foreign supplier (e.g., hotel booking or transport services), they may be liable to pay GST under the reverse charge mechanism.
6. Input Tax Credit (ITC):
- Tour operators can claim ITC on goods and services used for providing taxable tour operator services if they opt for the 18% GST rate.
- No ITC is allowed if the tour operator charges GST at 5%.
7. Compliance:
- Tour operators need to register under GST if their aggregate turnover exceeds the threshold limit specified by the GST law.
- They must issue proper invoices, file GST returns, and maintain records as required.
Input Tax Credit (ITC) on inbound tour packages can be complex, depending on the GST rate applied by the tour operator. Here's a detailed explanation:
1. GST Rates for Tour Operators:
- 5% GST Rate (Without ITC):
- Tour operators can opt to charge GST at 5% on the services they provide.
- If they choose this rate, they cannot claim ITC on the goods and services used to provide these tour packages.
- 18% GST Rate (With ITC):
- Tour operators can opt to charge GST at 18% on the services they provide.
- If they choose this rate, they can claim ITC on the goods and services used to provide these tour packages.
2. Conditions for Claiming ITC:
To claim ITC, the following conditions must be met:
- The tour operator must have a valid GST invoice or debit note issued by the supplier.
- The goods or services should be received.
- The tax charged on the invoice should have been paid to the government.
- The tour operator should have filed the required GST returns.
- The ITC should be claimed within the stipulated time frame, usually before the due date for filing the return for the month of September following the end of the financial year or the date of filing the annual return, whichever is earlier.
3. Eligible ITC:
Tour operators can claim ITC on the following expenses, provided they opt for the 18% GST rate:
- Hotel accommodation services.
- Transportation services (e.g., buses, cabs).
- Food and beverages (subject to certain conditions and restrictions).
- Guide services.
- Entrance fees to monuments, parks, etc.
4. Ineligible ITC:
Even if a tour operator opts for the 18% GST rate, certain ITC claims are restricted or not allowed under GST law, such as:
- Motor vehicles (except when used for further supply of vehicles, transportation of passengers, or imparting training).
- Goods and services used for personal consumption.
- Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.
5. Record-Keeping and Documentation:
- Tour operators must maintain detailed records of the goods and services procured and used in providing the tour packages.
- Proper documentation and timely filing of returns are essential to claim and utilize ITC.
6. Reverse Charge Mechanism (RCM):
- If a tour operator procures services from an unregistered supplier or a foreign supplier (e.g., hotel booking or transport services), they may be liable to pay GST under the reverse charge mechanism and can subsequently claim ITC on the tax paid under RCM.
Practical Example:
If a tour operator arranges a tour for foreign tourists and incurs expenses on hotel accommodation, transportation, and guide services, they can claim ITC on these expenses if they charge 18% GST on the tour package and meet all the conditions for claiming ITC.
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CA. Praveen Sharma
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