Applicability of GST on Tour Operator Service
There is a lot of ambiguity on the GST service provided by the tour operator whether they will take the input credit or not. Which option will be the best for the tour operator service. In this blog, we will check all the details
What are the options for Tour package services –
There are three options, first Act as a tour operator without claiming input credit and second claim input credit and the Third option is to act as a pure agent.
1) Act as a Tour Operator with No Input credit
Charge 5% GST to the customer on the total package and claim no input credit. But in this, there is one exception an Entity can claim the input credit
2) Act as a Tour Operator and Claim Input credit
Charge 18% GST to the customer on the total package and claim input credit. But in this, while taking credit we need to understand the place of supply rule. In this tour operator will get the credit of general expenditure like Rent, Professional fees, etc. While difficult to claim the Traveling and Hotel expenses.
Place of Supply Rule –
For Hotel booking – In the case of the hotel place of supply will be the place where the hotel is located, So the hotel will charge only CGST and SGST, So if the tour operator is located in that area then only he can claim the GST credit.
For Traveling – Place of supply for the flight will be where the flight embarks, so if the tour operator is located in that area then only he can claim the GST credit
3) Act as an Agent –
In this entity will act as a pure agent, Entity will raise the invoice to the customer and charge 18% GST on that. All the direct expenses incurred like traveling, hotel, and boarding will be taken as reimbursement on an Actual basis from the customer.
Note – In that case all the direct expenses need to be separately mentioned on the invoice and proper records should be kept.
Which Option is beneficial for tour operator in GST?
Each tour operator will do the own analysis and select the best option. In general, we can tell
Option 1 – Is best for Small Tour operators, with less accounting hurdle in that. Also, it will be good for the packaged tour.
Option 2 – Is best for Large Tour operator who is operating in more than one city and having GST number in almost all-states. Also where the business is mainly on B2B basis.
Option 3 – Is best for a Large Tour operator who is operating from one place on PAN India basis and can do the proper accounting and documentation of each transaction. Also where more hotel accommodation is done.
What is the HSN Code for Tour operator in GST?
9985 is the HSN Code as GST Tariff Act.
Can a Tour operator in a single registration select more than one option?
Yes, Tour operator on each and every deal take his views in which option he will go. As there is no Restriction visible in law.
Option 1 – Charge 5% GST with No Input tax credit for Package tour.
Option 2- Charge 18 % GST Act as a Tour Operator and Claim Input credit for B2B customer
Option 3- Charge 18 % GST on commission amount and Act as pure Agent for hotel booking
