Brief Analysis of GST on Tours and Travels
All tourism and travel services fall within the GST net (no blanket exemption). In the GST tariff, “tour operator services” (inclusive tour packages) are listed under Heading 9985 (Support Services), defined as “any person engaged in 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”. In practice, GST applies to tours (packages), ticket bookings, hotel accommodation, and related services. Export of tour services (services supplied to or for consumption outside India) qualify as export of service (IGST 0%) if the recipient is outside India . Conversely, travel services consumed in India (domestic tours or inbound foreign travel within India) attract GST on a destination basis.
Extract from N. No. 11/2017 CT(R), Dt. 28-06-2017
S. No.
SAC
Description of Service
Rate of Tax
Condition
23
9985 (Support services)
18. Inserted vide N. No. 1/2018 CT(R), Dt. 25-01-2018
(i) Supply of Tour Operator’s services.
Explanation - "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
5%
1. Provided that credit of input tax charged on goods and services used in supplying the service 18other than the input tax credit of input service in the same line of business (i.e. tour operator service procured from another tour operator) has not been taken [Please refer to Explanation no. (iv)]
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.
Heading 9985
(iii) Support services other than (i) and (ii) above.
18%
-
Explanation No. (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 section 17(2) of the CGST Act, 2017 and the rules made thereunder.
Extract from N. No. 12/2017 CT(R), Dt. 28-06-2017
S. No.
SAC
Description of Services
Rate of Tax
6852A
9985
(68. Inserted vide N. No. 04/2022 CT(R), Dt. 13-07-2022 w.e.f. 18-07-2022)
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 6 months for legitimate non-immigrant purposes.
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/-).
Nil
Tour Packages: A Tour Operator should charge GST at 5% (2.5% CGST + 2.5% SGST) on a packaged tour only if two conditions are met:
(a) the Invoice is gross and inclusive of all transportation and accommodation charges; and
(b) No ITC is claimed on inputs used for that supply (except ITC on same line of Business).
If anyone of condition is not satisfied, the service is taxable at 18% under the “support services” category . Thus, a fully bundled domestic tour (transport + hotel) can be taxed at 5% if invoiced together, but an ancillary service (e.g. half-day local sightseeing with separate billing) is classified as support services under Heading 9985(iii) and taxed at 18%.
As per S. No. 23(i) & (iii) of N. No. 11/2017 CT(R), Dt. 28-06-2017, Supply of Tour Operator’s Services are taxable @ 5% with limited ITC & 18% with ITC. As per S. No. 52A of the N. No. 12/2017 CT(R), Dt. 28-06-2017, Supply of Tour Operator Services to a Foreign Tourist to the extent of Service provided outside the India is exempt supply as per the above illustration.
Travel Agent Services: Commissions and Service charges earned by travel agents are generally taxed at 18% with full ITC. For example, if an agent charges a service fee for booking flights, hotels or visa assistance, GST is 18% on the fee. Specific rules apply for air ticketing under CGST Rules: when an agent issues tickets, the taxable value may be taken as 5% of fare for domestic tickets and 10% for international tickets, with GST @18% on that value. (Thus GST on the agent’s “Service” is effectively 18% of 5%/10% of the fare.)
Passenger Transport Service: Refer our details Article on GST Rate of Passenger Transport Service in January 2025 E-Bulletin.
Accommodation and Hospitality: Hotel room tariffs are taxed in slabs: rooms costing up to ₹7,500 per day attract 12% GST (6% CGST + 6% SGST) , whereas rooms above ₹7,500 are taxed at 18%. (Hotels charge these rates on the room rent; housekeeping/banquet services have separate rates.) Similarly, restaurant services in non-‘specified premises’ attract 5% (with no ITC), if it is specified premises taxable @ 18% with ITC. If a travel agent acts as a pure agent (e.g. collects hotel charges on behalf of a client with no mark-up), it is exempt supply. He has to issue Bill of Supply for the exempt supply & ITC has to be reversed u/s 17(2) of the CGST Act, 2017 and rules made thereunder.
Other Services: Miscellaneous travel-related services are usually taxed at 18%. These include services such as visa/passport facilitation, travel insurance commissions, guiding/escort fees, railroad ticket booking commissions, and support services (e.g. baggage handling not bundled with transport).
Registration: Tour operators and travel agents must register under GST if their aggregate turnover exceeds ₹20 lakh (₹10 lakh for special category states). Composition scheme also available for tour operators or travel agents, but it is not advisable to opt Composition Scheme as Rate of Tax is 6% and threshold limit is 50Lakhs.
Place of Supply (PoS) and Reverse Charge Mechanism (RCM)
PoS in cases where Supplier and Recipient is in India
Section 12(9) of the IGST Act, 2017 Provides that for Passenger Transportation Services - The place of supply shall be as below, -
If the services is provided to
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the place where the passenger embarks on the conveyance for a continuous journey:
Provided that where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage.
PoS in cases where Supplier or Recipient is Outside India
Sec. 13(10) of the IGST Act, 2017 provides that For Passenger Transportation Services place of supply shall be the place where the passenger embarks on the conveyance for a continuous journey.
The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.”
Sec. 13(2) of the IGST Act, 2017 provides that For other travel services, “the place of supply of services shall be the location of the recipient”. Hence, if an Indian tour operator sells a package to a foreign resident, the place is outside India and it is Export of Service. Conversely, if a foreign supplier provides travel-related services to an Indian agent (e.g. foreign hotel or tour operator service), It is Import of Service, the Indian recipient must pay GST on reverse charge as per Section 5(3) of the IGST Act, 2017.
Thus, if a tour begins in Tamilnadu and continues to Kerala, the place of supply is Tamilnadu. If the recipient is a registered business and supply is within one state, CGST+SGST apply;
Legal Definition of “Tour Operator”
S. No. 23 of the N. No. 11/2017-CT(R) defines “Tour Operator” as above . Recent Advance Rulings clarify its interpretation. For example, in Crown Tours and Travels (Rajasthan AAR, 2019), the authority noted that “business of operating tours” is very broad and includes incidental activities (elephant rides, guides, boat rides, etc.). If the service-provider organizes a whole-day sightseeing tour (with local transport provided by the main operator), it is considered a tour operator service. However, the same Ruling held that where a provider renders only ancillary services (without arranging accommodation or primary transport and bills separately), that supplier does not qualify as a tour operator and must charge 18% as a support service . In short, the “tour operator” classification hinges on the bundle of services and invoicing: full-package tours (with inclusive billing) qualify at 5%, whereas isolated components are taxed at 18%.
Conclusion:
- Domestic Tour Package (Inclusive). An Indian tour operator sells a 3-day North India package (transport, sightseeing, hotels) to a domestic customer for ₹100,000 inclusive. If the single invoice meets the inclusive criteria, GST at 5% (₹5,000) applies . The operator takes no ITC (except any tour-to-tour credits as allowed).
- Ancillary Local Tour. A local sightseeing operator provides only elephant rides, boating and guide services (no hotel or long-distance transport) under a one-day package, and bills it to tourists. This was the subject of Crown Tours & Travels (AAR) – the Authority held that because the supplier did not furnish accommodation/primary transport and issued a separate bill, his service is “other support service” under 9985(iii) at 18% , not the 5% tour operator rate.
- Foreign Client / Export. If a US citizen books a world tour package from an Indian agent (with travel outside India), the place of supply is outside India (export of service) . The invoice is denominated in foreign currency, and the tour service is zero-rated supply. The tour operator can then claim refunds of any GST paid on inputs for that export.
The GST framework offers both opportunities and challenges for tour operators in India. With clearly defined tax rates—5% with restricted ITC or 18% with full ITC—operators must carefully assess their pricing models and input costs before choosing a tax strategy. Additionally, understanding the place of supply rules is critical, especially for businesses handling inbound and outbound tours. By maintaining proper documentation, issuing compliant invoices, and staying updated on regulatory changes, tour operators can ensure seamless GST compliance while remaining competitive in a dynamic travel industry.
