GST UPDATE

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The Goods and Services Tax (GST) has significantly impacted various sectors, including the Tour & Travels industry. Understanding the GST implications on this sector is crucial for businesses operating within it. Here's an overview of the key points related to GST on the Tour & Travels industry that can be shared in a knowledge session:

1. GST Rates Applicable to the Tour & Travels Industry

Hotel Accommodation: GST rates on hotel accommodation vary based on the transaction value per night. The rates are structured as follows: Less than Rs. 1,000: Nil

Rs. 1,001 to Rs. 7,500: 12%

Above Rs. 7,500: 18%

Tour Operator Services: The GST rate for tour operator services is generally 5% without input tax credit (ITC). This is applicable under Section 9(3) of the CGST Act, 2017, which covers reverse charge mechanisms and special categories of services.

Transport Services: The GST on transport services, including air travel, is categorized under different slabs based on the class of travel: Economy class air travel is taxed at 5%

Business class at 12%

2. Input Tax Credit (ITC) for the Tour & Travels Industry

Under Section 17(5) of the CGST Act, 2017, there are specific restrictions on the availment of ITC for the tour and travels industry. For instance, businesses cannot claim ITC on motor vehicles for transportation of persons having seating capacity of less than or equal to 13 (including the driver), except when they are used for making the following taxable supplies:

Further supply of such vehicles or conveyances

Transportation of passengers

Imparting training on driving such vehicles

However, tour operators can claim ITC on other inputs, input services, and capital goods used for providing taxable services.

3. Place of Supply in Tour & Travels Industry

Understanding the place of supply is crucial for determining the correct GST rate and ensuring compliance. The place of supply for tour and travel services is determined based on various factors as per Section 12(9) and Section 13(9) of the IGST Act, 2017. For instance, the place of supply for services provided to a registered person will be the location of such person. For services provided to an unregistered person, it could be the location where the passenger embarks on the conveyance for a continuous journey.

4. GST on Outbound Tours

For outbound tours, where services are consumed outside India, the place of supply is considered outside India, and such services may qualify as export of services under Section 2(6) of the IGST Act, 2017, provided other conditions are met. This means that GST may not be applicable on the foreign component of the tour package.

5. Compliance and Documentation

Businesses in the tour and travels industry must ensure compliance with GST regulations by maintaining proper documentation, filing returns timely, and adhering to the invoicing rules under the GST law. This includes issuing tax invoices, maintaining records of services provided, and keeping track of ITC availed.

Conclusion

The GST regime has brought about significant changes in the taxation of services in the Tour & Travels industry. Businesses need to stay informed about the latest GST rates, rules, and regulations to ensure compliance and optimize their tax liabilities. Understanding the nuances of GST in this sector can help in making informed decisions and strategizing business operations effectively.

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CA. Praveen Sharma 

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