GST on Tour Package
Breaking Down Indian GST on Tour Packages Rates & More
India's diverse geography and rich cultural heritage have made domestic tourism a booming industry. From spiritual journeys to luxury retreats and adventure tours, the demand for packaged travel experiences is on the rise. Along with this demand comes the responsibility for travel operators to stay compliant with taxation laws, most notably the Goods and Services Tax (GST). For businesses in the tourism sector, understanding how GST on tour packages affects the cost structure and service classification of Indian tour packages is vital.
In this guide, we’ll break down the core aspects of Indian GST as it applies to tour packages—covering tax rates, invoicing methods, compliance requirements, and tips for optimizing tax strategy while maintaining legal alignment.
GST Basics in the Context of Indian Tour Packages
The Goods and Services Tax (GST) is a comprehensive indirect tax applied uniformly across India. For travel and tourism operators, GST affects every aspect of their offering—whether it's a complete travel itinerary, an accommodation booking, or transportation. If you are selling bundled travel experiences within India, your services fall under the purview of GST on Tour Package.
This tax impacts pricing, profit margins, and compliance efforts for travel firms, making it essential for operators to clearly understand how it applies to both individual and composite services.
What Constitutes a Tour Package in Indian GST Terms?
In GST terminology, most tour packages qualify as composite supplies—multiple services sold together with one being the principal service. For instance, if a tour includes hotel accommodation, meals, and local sightseeing, the whole offering is considered one supply. The GST rate depends on the primary service in the package.
Alternatively, if services are invoiced separately—like hotel booking and vehicle rental—they are treated as individual supplies, each attracting its applicable GST rate.
Applicable GST Rates for Indian Tour Packages
Tour operators in India generally choose between two main tax options for GST compliance:
Option 1: 5% GST without Input Tax Credit (ITC)
- For operators who do not claim credits on their input services (hotels, transport vendors, etc.)
- Keeps pricing lower for customers but prevents recovery of taxes paid on inputs
Option 2: 18% GST with Input Tax Credit
- Allows operators to claim ITC on all purchases related to the supply of the tour package
- Suitable for premium or high-cost tour providers who incur significant expenses on third-party services
Choosing the right rate depends on the company’s operational structure and customer pricing strategy.
HSN Code for Travel Services
Correct classification is vital for GST returns and audits. For Indian tour services, the standard HSN (Harmonized System of Nomenclature) code is:
- HSN Code 9985 – Travel arrangement and tour operator services
This code is to be mentioned in all tax invoices and filings to ensure proper compliance.
What’s Included in a Tour Package?
Most Indian tour packages combine the following elements:
- Hotel stays and resort bookings
- Inter-city and intra-city transport (cars, trains, coaches)
- Meals and beverages
- Sightseeing tours and event access
- Travel guides and logistics management
When billed under a single price tag, this bundle attracts GST on Tour Package as a composite supply.
Place of Supply & Type of Tax
The location of the service recipient and provider determines the tax type:
- Intra-state Supply: Attracts CGST and SGST
- Inter-state Supply: Attracts IGST
Correctly determining the place of supply is essential for charging the right type of tax and avoiding future disputes.
Registration Threshold for Travel Operators
If your annual turnover exceeds the threshold limit, GST registration becomes mandatory:
- Rs. 20 lakhs for most states
- Rs. 10 lakhs for special category states
Post registration, businesses must regularly file returns (monthly or quarterly), issue GST-compliant invoices, and maintain accurate financial records.
Invoicing Best Practices
For smooth GST operations, every invoice issued must:
- Include GSTIN, HSN code, and clearly show the tour package details
- Specify whether CGST/SGST or IGST is charged
- Be dated and serially numbered
- Mention the applicable GST rate and total tax amount
Invoices are critical for both compliance and claiming Input Tax Credit.
Input Tax Credit – Should You Opt for It?
Claiming ITC is advantageous if you operate with significant third-party costs. For example:
- If your package includes luxury hotel stays, high-end transportation, or costly vendor services
- ITC helps offset taxes already paid to suppliers
However, if your operational costs are minimal or if you’re targeting a price-sensitive market, going with the 5% GST without ITC may be better.
Challenges Faced by Tour Operators
Even with clear guidelines, travel businesses face several challenges:
- Service Bundling Confusion: Misclassifying mixed supplies as composite can lead to incorrect taxation
- Frequent Tax Updates: Government notifications and rate changes require constant tracking
- Vendor Invoice Management: Collecting correct GST invoices from hotels, transporters, and guides is often a hurdle
- Multi-State Services: Identifying place of supply in tours spanning multiple states is tricky
How Professional Guidance Helps
Chartered Accountants and GST consultants can help you:
- Choose the right tax structure
- Ensure accurate documentation and invoicing
- Keep up with GST notifications
- Avoid penalties and stay audit-ready
For travel businesses, working with a CA is a smart move that saves time and reduces compliance risk.
Key Takeaways
- GST on Tour Package applies to bundled services offered under one invoice
- Operators must choose between 5% (without ITC) and 18% (with ITC)
- HSN Code 9985 is mandatory for classification
- Accurate invoices, place-of-supply rules, and compliance tracking are critical
- Strategic tax planning can optimize margins and enhance competitiveness
Final Thoughts
As the Indian tourism sector continues to expand, clarity on GST will play a big role in how tour operators price and market their services. The GST regime, while strict in its structure, also provides flexibility for businesses to design tax strategies suited to their model. Understanding the nuances of GST on Tour Package helps not just in compliance, but also in building a sustainable and growth-oriented travel business.
For expert GST compliance and accounting support, reach out to our CA team for tailored solutions to meet your business goals.
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