6/1/24

GST Applicability
and Issues in
Tour & Travel
Industry
Date: 1st June 2024

Organised by: Borivali (Central) CPE

Study Circle Of WIRC of ICAI

Presented by: CA. Umang Talati

Definition

Notification No. 11/2017- Central Tax (Rate) DT 28.06.2017

Sr.No 23 - "tour operator" means any person engaged in the business

of planning, scheduling, organizing, arranging tours (which may
include arrangements for accommodation, sightseeing or other
similar services) by any mode of transport, and includes any person
engaged in the business of operating tours.

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[1] Inserted vide notification No. 1/2018- Central Tax (Rate) dt 25.01.2018

Sl. Chapter, Section or Description of Service Rate Condition

No. Heading (per cent.)
(1) (2) (3) (4) (5)
23 Heading 9985 (i) Supply of tour operators services. 2.5 1. Provided that credit of input tax charged
(Support services) Explanation.- on goods and services used in supplying
"tour operator" means any person engaged in the service[, other than the input tax credit
the business of planning, scheduling, of input service in the same line of
organizing, arranging tours (which may include business (i.e. tour operator service
arrangements for accommodation, sightseeing Procured from another tour operator)]has
or other similar services) by any mode of not been taken [Please refer to Explanation
transport, and includes any person engaged in no. (iv)]
the business of operating tours. 2. The bill issued for supply of this service
indicates that it is inclusive of charges of
accommodation and transportation
required for such a tour and the amount
charged in the bill is the gross amount
charged for such a tour including the
charges of accommodation and
transportation required for such a tour.
(ii) ….. 2.5 …..
[(iii) Support services other than (i) and (ii) 9 -]1
above.

CA Umang Talati, Mumbai

• Tour operator – GST Rate

• Only Flight booking
• Only Hotel booking

Tour
• Packages - say 2 Nights 3 days
a) Hotel stay
b) B/F & one meal
c) Site seeing - Entry to

Operators
monuments / park / museum
d) Evening entertainment - Disco /
DJ
e) Welcome drink – non-alcoholic

& Travels or beer

• How to determine rate?
• Entry 9985 – is to-fro
transportation must to classify
under 5% rate?

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[1] Inserted vide notification No. 1/2018- Central Tax (Rate) dt 25.01.2018

Sl. Chapter, Section or Description of Service Rate Condition

No. Heading (per cent.)
(1) (2) (3) (4) (5)
23 Heading 9985 (i) Supply of tour operators services. 2.5 1. Provided that credit of input tax charged
(Support services) Explanation.- on goods and services used in supplying
"tour operator" means any person engaged in the service[, other than the input tax credit
the business of planning, scheduling, of input service in the same line of
organizing, arranging tours (which may include business (i.e. tour operator service
arrangements for accommodation, sightseeing Procured from another tour operator)]has
or other similar services) by any mode of not been taken [Please refer to Explanation
transport, and includes any person engaged in no. (iv)]
the business of operating tours. 2. The bill issued for supply of this service
indicates that it is inclusive of charges of
accommodation and transportation
required for such a tour and the amount
charged in the bill is the gross amount
charged for such a tour including the
charges of accommodation and
transportation required for such a tour.
(ii) ….. 2.5 …..
[(iii) Support services other than (i) and (ii) 9 -]1
above.

CA Umang Talati, Mumbai

Explanation to Notification 11/2017- CTR dt

28.6.2017 (As amended)
• Conditions to 5% Rate
• ITC not taken as per Expl (iv)
• Bill is inclusive – Accommodation AND transportation
• Explanation 4(iv) to rate notification
“4 For the purposes of this notification-
(iv) Wherever a rate has been prescribed in this notification subject to the condition that credit of input
tax charged on goods or services used in supplying the service has not been taken, it shall mean that, -
a) Credit of input tax charged on goods or services used exclusively in supplying such service has not
been taken; and
b) credit of input tax charged on goods or services used partly for supplying such service and partly
for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is
an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and
Services Tax Act, 2017 and the rules made thereunder.”

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Case Study 1

M/s Raja Travels is in the business of planning,

scheduling, organizing of tours. They are registered in
GST in the state of Maharashtra. It also provides
standalone services of booking of accommodation Sr.No. Particulars Rate of Tax
with/without transportation.
i) A approaches M/s Raja Travels for booking of a hotel in
Based on the above facts, M/s Raja Travels wants Delhi only.
certain clarifications on the following:
a) Whether the GST Rate @ 5% is Mandatory or ii) B approaches M/s Raja Travels for booking for hotel in
Optional? Coorg along with Airport Transfer from Mangalore.

b) Can GST 5% be applied transaction-wise or has

to be opted for the entire FY?
c) What will be the rate of tax in the given
scenarios below:

CA Umang Talati, Mumbai

Case Study 1
• Advance Ruling in case of Golden Vacations Tours and Travels (2019-VIL-291-AAR) – WEST
BENGAL
whether merely arranging the accommodation for the clients in hotels is classifiable as a tour operator service –
HELD - Arranging accommodation might be provided as add-ons, but that is not the essence of the tour operating
service. The Applicant's service, therefore, cannot to be treated as that of a tour operator - The support services under
SAC 998552 which include arranging reservations for accommodation services for domestic accommodation,
accommodation abroad etc. The Applicant's supply is specifically covered and, therefore, classifiable under SAC 998552
and taxable @18% - the Applicant is eligible to claim the input tax credit as admissible under the law

• Can ITC in this scenario be Optimised?

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Case Study 2
M/s All Hotels Pvt Ltd is a tour operator registered in the state of Gujarat. Along with the activities
of booking tours, it is also engaged in purchasing inventory of hotel rooms from various hotels. The
rooms are from various 3star to 5star hotels. This inventory of rooms are further sold to other small
tour operators who actually sell it to the final customer.
In view of the above, M/s All Hotels Pvt Ltd approaches you with the following questions: -
a) Can the tour operator claim credit of the hotels situated in Gujarat and in other states? If the
answer is “No” or “Partial No”, how to mitigate the situation practically?

CA Umang Talati, Mumbai

Case Study 2
b) Whether, the purchaser of hotel rooms i.e. small tour operators can claim credit under section
16? Can it be said that the small tour operator has received the services?
c) How to differentiate between Recipient of Services v/s Beneficiary of Services while examining
various contracts such as the above?
i. In case, there is some damage/problem during the stay, can the Hotel recover charges from
the customer/tourist or All Hotels Pvt Ltd with whom, they have their original contract.

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Place of supply of services where location of supplier of service

and location of the recipient of service is in India (Sec- 12)

Scenarios Place of Supply

Services directly in relation to an immovable property Location of immovable property or intended to be
• Including services by architects, interior located
decorators, engineers and other experts, • Where property/ boat/ vessel located in more
including estate broker, right to use immovable than one state- supply made in each of respective
property, co-ordination of construction work state -: proportionate allocation amongst states as
• Lodging accommodation by hotel, inn, guest per the contract or as may be prescribed
house, home stay, club or campsite, house boat • Where location of the immovable
• For marriage or reception or official, social, property/boat/vessel is located or intended to be
religious, or business function r services located outside India -: Place of supply will be the
provided in relation to such function at such location of the recipient
property
• Any ancillary services to above

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Sec 16(2)
Input Tax • “Notwithstanding anything contained
in this section, no registered person
Credit – Sec shall be entitled to the credit of any
16 input tax in respect of any supply of
goods or services or both to him
unless,––
a) he is in possession of a tax invoice
…;
b) he has received the goods or
services or both.
c) …
d) …”

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• Sec 2(93) Recipient of supply of goods or services or

Recipient of both, means—
(a) where a consideration is payable for the supply
Supply of of goods or services or both, the person who is liable
to pay that consideration;

Goods/Service (b) where no consideration is payable for the supply

of goods, the person to whom the goods are
delivered or made available, or to whom possession
or use of the goods is given or made available; and
(c) where no consideration is payable for the supply
of a service, the person to whom the service is
rendered,
and any reference to a person to whom a supply is
made shall be construed as a reference to the
recipient of the supply and shall include an agent
acting as such on behalf of the recipient in relation
to the goods or services or both supplied;

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Case Study 3
Due to the COVID-19 pandemic, a lot of the tour packages within and outside India got cancelled. In
view of the same, the GST implications needs to be discussed from the view-point of the Tour
Operator as well as the input services which he has availed for providing such services
a) Output Side
i. Tour operator cancels - Full Refund
ii. Customer Cancels: Partial Refund – Rest is retained (as per contract)
iii. No Refund – but a document is given which can be used upto a given period of time
[Generally, advances received and GST on the same is discharged on the receipt of the same as per
Time of Supply of Services. Invoices are only issued on the day of the tour.]

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Case Study 3
b) Input Side
i. Hotels give CN - to be utilized by next FY but not cash refund
ii. Tour Operator is opting for discharging GST-18%. On cancellation –all bookings made by
Tour Operator such as car booking, hotel etc. are forfeited by the respective service
providers. Even Credit Notes are not issued. Insurance Company reimburses tour operator
for loss of money due to cancellations. - Is ITC available in the present case?

c) Are these redeemable documents – in nature of voucher? Discuss the taxability of same.
[REFERENCES: M/s Lemon Tree Hotel vs. Comm (2019-VIL-789-CESTAT-DEL-ST) and Circular No.
137/07/2020-GST]

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Conditions & • Conditions

• Taxable value declared in the
Time Limit - invoice exceeds the actual taxable
value in respect of such supply.
Credit Note • Tax charged in the invoice exceeds
(Sec34) the actual payable in respect of
such supply.
• Service supplied is deficient.
• Time Limit
• shall be issued on or before 30th
September of next F.Y. or date of
filing annual return whichever is
earlier.

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Advance Received for Service – Now

Cancelled
Circular • Invoice already Issued & GST paid
137/07/2020 • Issue CN in terms of Sec34
• If no output liability to adjust –
dt 13/4/2020 Apply refund “Excess payment of
tax, if any” through FORM GST
RFD-01
• Invoice not Issued (GST Paid on
advance)
• Issue refund voucher in terms of
Sec31(3)(e)
• Apply refund “Excess payment of
tax” through FORM GST RFD-01

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M/s Lemon Tree Hotel vs. Comm (2019-VIL-

789-CESTAT-DEL-ST)
• M/s Lemon Tree Hotels receives advance from customers on booking of hotel room. On
cancellation of the booking - amount is forfeited by the Hotel by way of cancellation charges as
per contract.
• Whether Service Tax is liable on amount forfeited by way of cancellation charges for cancellation
of hotel booking
• HELD - the customers pay an amount to the appellant in order to avail the hotel accommodation
services, and not for agreeing to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act; and chargeable on full value and not on abated value. The amount
retained by the appellant is under the terms of the contract, they are entitled to retain the whole
amount or part of it. Accordingly, the retention amount (on cancellation made) by the appellant
does not undergo a change after receipt. Accordingly, no service tax is attracted under the
provisions of Section 66 E(e) of the Finance Act.

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Time of supply – in case of vouchers 13(4)

• means an instrument where there is an obligation to accept it as

Voucher – sec consideration or part consideration for a supply of goods or services or both
and where the goods or services or both to be supplied or the identities of

2(118) their potential suppliers are either indicated on the instrument itself or in
related documentation, including the terms and conditions of use of such
instrument

Time of supply of
goods/services in • Date of issue of voucher – if supply is identifiable at that point OR
• Date of redemption of voucher, in all other cases

case of vouchers
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Indian National – Tour In India

• Single state
• Multiple states – how to determine value per state?
• Eg: Delhi, Agra , Jaipur

Packaged
Indian National – Tour out of India

Place of supply – issues

tour - India • Customer from same state

• Customer outside state
• Customer registered or not
• Foreign tourist

Should tour operator - obtain registration in multiple states?

• Above example – in Delhi, UP & Rajasthan

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Place of supply of services where location of supplier of service

and location of the recipient of service is in India (Sec- 12)

Scenarios Place of Supply

The place of supply of services, except the (a) made to a registered person shall be the
services specified in sub-sections (3) to (14),-- location of such person;

(b) made to any person other than a registered

person shall be,--

(i) the location of the recipient where the

address on record exists; and
(ii) the location of the supplier of services in
other cases.

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Place of supply of services where location of supplier of service

or location of the recipient of service is outside India (Sec- 13)

Scenarios Place of Supply

The place of supply of the following services location where the services are actually
performed
services supplied to an individual, represented
either as the recipient of services or a person
acting on behalf of the recipient, which require
the physical presence of the recipient or the
person acting on his behalf, with the supplier
for the supply of services.

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Excursions - optional

Packaged
• Adventure activities / Visit to attractions
• Decided & paid for – before tour
• Decided during the tour & paid to the tour manager at site in INR/Forex

tour – India Hosting/arranging a business conference – say RRC of BCSC

• Delegate Fees charged (Conf Fee + Hotel + Food + Sightseeing)

(Cont) • Registered Person paying for delegate with GSTIN

• Unregistered Person
• International tour - Taxable? - what amount?
• Billing to registered customers – say business conference [Hanover fair in
Germany]

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Foreign National
• Tour in India with Indian Tour Operator pd in INR/Forex
• Tour in India with Foreign Tour Operator pd in Forex
• Tour outside India with Indian Tour Operator pd in INR/Forex
• Tour outside India with Foreign Tour Operator but booking through Indian Travel Operator pd
in Forex

Packaged Advance received – treatment thereof – rate of GST

• In INR
• In Forex

tour - International tour package - Consideration - Say 125000/- INR + 450 USD
• USD to be converted at current rate – to be paid in India in INR or

International • USD can be paid in USD after reaching destinations.

Excursions - optional
• Decided and paid for before tour
• Later paid to tour manager at site at foreign location in Forex

Tourist joining in other country say – at London

• GST attracted?

Gratitude / tips – treatment?

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Export & Import of Services – Definitions IGST

Act

2(6) "export of services" means the supply of any service (11) ''import of services" means the supply of any
when,-- service, where-

(i) the supplier of service is located in India; (i) the supplier of service is located outside India;
(ii) the recipient of service is located outside India; (ii) the recipient of service is located in India; and
(iii) the place of supply of service is outside India; (iii) the place of supply of service is in India;
(iv) the payment for such service has been received by
the supplier of service in convertible foreign
exchange 1[or in Indian rupees wherever permitted by
the Reserve Bank of India]; and
(v) the supplier of service and the recipient of service are
not merely establishments of a distinct person in
accordance with Explanation 1 in section 8;

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Notification No. 9/2017 - Integrated Tax

(Rate) - Exemption
Sl. Chapter, Description of Service Rate Condition
No. Section or (per
Heading cent.)
(1) (2) (3) (4) (5)
54 Heading 9985 Services provided by a tour NIL NIL
(Support operator to a foreign tourist in
services) relation to a tour conducted
wholly outside India.

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Place of supply of services where location of supplier of service

or location of the recipient of service is outside India (Sec- 13)

Scenarios Place of Supply

The place of supply of the following services location where the services are actually
performed
services supplied to an individual, represented
either as the recipient of services or a person
acting on behalf of the recipient, which require
the physical presence of the recipient or the
person acting on his behalf, with the supplier
for the supply of services.

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Place of supply of services where location of supplier of service

or location of the recipient of service is outside India (Sec- 13)

Section 13: Place of supply of services where location of supplier or location of recipient
is outside India

(7) Where the services referred to in sub-section (3), (4) or (5) are supplied in more than
one State or Union Territory, the place of supply of such services shall be taken as being in
each of the respective States or Union Territories and the value of such supplies specific to
each State or Union Territory shall be in proportion to the value for services separately
collected or determined in terms of the contract or agreement entered into this regard or,
in the absence of such contract or agreement, on such other basis as maybe prescribed.

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Exemption (Entry No. 52A)

Tour operator service, which is performed partly in India and partly outside India, supplied by a tour
operator to a foreign tourist, to the extent of the value of the tour operator service which is
performed outside India:

Provided that value of the tour operator service performed outside India shall be such proportion of
the total consideration charged for the entire tour which is equal to the proportion which the number
of days for which the tour is performed outside India has to the total number of days comprising the
tour, or 50% of the total consideration charged for the entire tour, whichever is less:

Provided further that in making the above calculations, any duration of time equal to or exceeding 12
hours shall be considered as one full day and any duration of time less than 12 hours shall be taken as
half a day.

Explanation. - “foreign tourist” means a person not normally resident in India, who enters India
for a stay of not more than six months for legitimate non- immigrant purposes.

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Exemption (Entry No. 52A)

Illustrations:
A tour operator provides a tour operator service to a foreign tourist as follows: -
(a) 3 days in India, 2 days in Nepal; Consideration Charged for the entire tour: Rs. 1,00,000/-
Exemption: Rs. 40,000/- (= Rs. 1,00,000/- x 2/5) or Rs. 50,000/- (= 50% of Rs.1,00,000/-) whichever is
less, i.e., Rs.40,000/- (i.e., Taxable value: Rs. 60,000/-);

(b) 2 days in India, 3 nights in Nepal; Consideration Charged for the entire tour: Rs.1,00, 000/-
Exemption: Rs.60,000(= Rs.1,00,000/- x 3/5) or, Rs.50,000/- (= 50% of Rs.1,00,000/-) whichever is less,
i.e., Rs.50,000/- (i.e., Taxable value: Rs.50,000/-);

(c) 2.5 days in India, 3 days in Nepal; Consideration charged for the entire tour: Rs.1,00, 000/-
Exemption: Rs.54,545 (=Rs.1,00,000/- x 3/5.5) or, Rs.50,000/- (= 50% of Rs.1,00,000/-) whichever is
less, i.e., Rs.50,000/-(i.e., Taxable value: Rs.50,000/-)

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Packaged • Aggregator - Make my trip/Booking.com

tour – • Taxability for Indian Aggregator

• Taxability for International Aggregator with no

Aggregator office in India – web presence

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• ITC Availability?
• Hotel booked where registration is present

Tour • Hotel booked where registration not present

• Catering

operator – • Food served by hotel

• Local conveyance – bus etc.

Inward • Guide
• DJ

Supplies - • Food Packets

• Soft Skill Trainer

ITC • Local tour operator

• Entry fees – at attractions – shows, parks,
monuments, museums
• Gala night – entertainment + alcoholic drink

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• Planning
Efficiency in Eg: Audit Assignment in Delhi. Registration only
in Mah.
ITC a) Hotel Stay + Conveyance in Delhi
b) Only Hotel Stay in Delhi
Management • Would appointing Delhi tour operator help?

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Any Questions?

Thank You!

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