GST on Air Travel Agent: Valuation, GST Rate & Place of Supply (Detailed)
GST on Air Travel Agent: The advent of GST will also facilitate both domestic and international investments and create more dynamic and vibrant markets with ease of doing business and improve competition in India. It is now imperative to take steps to address the concerns and delays, to enable the industry to grow. This was a much needed step to simplify compliance and to make India more investor friendly. check more details for “GST on Air Travel Agent” from below…
GST on Air Travel Agent
An Air Travel Agent earns two types of income:
- commission from the Airlines for booking of air tickets;
- income in the form of processing fees etc. from the client for whom he books the tickets.
So the Air Travel Agent shall be raising below 2 types of invoices containing the details of name, address, GST Registration Numbers of the parties to whom the invoice is being issued and details about Place of Supply.:
- On the Airlines for commission for selling its Air tickets;
- On the Air traveler for its processing fees/ service charges / facilitation charges.
As per rule 32(3) of CGST Rules, the value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be deemed to be an amount calculated at the rate of:
- 5%of the basic fare in the case of domestic bookings, and
- 10%of the basic fare in the case of international bookings
Explanation – For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline.
So, GST is payable is as par below chart:
Valuation for air travel agent
The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be-
For domestic booking : 5%* of basic fare
For international bookins : 10 %* of basic fare
*5%/10% is not tax rate, it is portion of basic fare which will be deemed to be the taxable value and the term basic fare means that part of the air fare on which commissiom is normally paid to the air travel agent by the airline.
GST Rate for air Travel Agent
Gst tax rate shell be 18% with full itc for air travel agent.
Place of supply in case of air travel agents
Place of supply for an Air Travel Agent (ATA) for booking tickets to Pax
When an Air Travel Agent provides services to a person who is:
- Located in India and the person is registered under the GST law then, the place of Supply shall be the location of service receiver;
- Located in India but not registered under the GST Law but his address is available on records then the place of Supply shall be the location of the service receiver;
- Located in India but not registered under the GST Law and his address is not available on records then the place of Supply shall be the location of the service provider;
- If in case of the Air Travel Agent who is located in India but the Origin and Location of Airlines is not from India and the destination as well as location of passenger is not in India.
Then in the given case neither the Airlines nor the passenger will be registered under GST and nor will their address be available from the records, hence in the given case the place of supply shall be the location of service provider i.e. the location of the Air Travel Agent which is in India and hence this transaction would be liable to Tax.
Segment Pay-outs / commission/ incentives from CRS/GDS
Air Travel Agent also earns Segment Payouts / commission/ incentives from CRS/GDS like Ameadus, Worldspan, Galileo, Abacus for using their software for making booking in Airlines reservations systems which also would be liable for taxation under GST Law.
Place of supply of services
- In case the services are provided by the Air Travel Agents to Indian software companies, then the place of supply of services shall be the location of services receiver i.e. place of registration of Indian Software Company.
- In case the services are provided by the Air Travel Agents to foreign software companies, then the agent would fall within the definition of “intermediary” AND the place of supply of services shall be the location of services provider i.e. place of Air Travel Agent.
VISA AND PASSPORT ASSISTANCE
The visa processing charges charged by visa statutory authorities i.e. the consulates/embassies will be exempt from the payment of GST.
Visa/passport processing charges charged only by the statutory authorities is exempt from tax.
Visa/passports are done through Visa Facilitation Centers (VFCs) authorized by embassies / Visa Handling Agents then the same shall be liable to tax.
However, when the ATA provides these services to their client after adding further fees by whatever name called he shall be liable to pay tax on them as well and he can take Input Tax Credit of the tax paid to the VFC. GST will be applicable @18% for this service.
Analysis of input tax credit by Recipient of service.
“Recipient” of supply of goods or services or both, means—
- a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
- 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.
Since, Agent is booking Air ticket on behalf of Traveller, the traveller (A registered entity or his employee) will get credit of GST paid on Air Travel Ticket and the Agent should upload the GSTN of traveller on the portal of Airline at the time of Booking of Ticket.
Effect of GST on Air Travel Agents
Commission received from AirLines Company of booking of tickets: Air travel agent will get commission from Air Lines while booking the ticket, commission amount will be calculated as per Valuation rules given above. Air Travel Agent will issue Invoice of commission to AirLines with 18% GST and AirLines will get credit of same.
Commission charged by Air Travel Agent from Traveller:
If Air Travel Agent charges anything above Ticket value to the traveller on the name of commission or processing fee or any other charges, then he will have to pay GST @18% on such additional amount.
Note: Air Fair mentioned on Ticket will be requirement of expenses by Air travel Agent from the traveller and GST credit on ticket will be taken by registered traveller.
DOMESTIC AND INTERNATIONAL MEDICLAIM POLICIES AND TRAVEL INSURANCE BY TRAVEL AGENTS
Travel Agents issues mediclaim policies and travel insurance for clients through various insurance service providers and gets commission on cut and pay basis or at the end of the month (for overseas policies)
IMPACT ON CONSUMERS
In Pre GST era, there was a composite levy of both Service tax i.e 6%, as well as, Value Added Tax i.e 14.5% (Vary from State to State) on food and beverages served by hotels and restaurants which finally put the burden of 20.5% in the pocket of ultimate consumers. However, some relief was provided for Non-AC Restaurants supplying food and beverages as no service tax was levied on these restaurants.
Post GST, the scenario shall be completely different. As discussed above that supply of food and drinks in a restaurant shall be treated as a supply of services. Hence, only GST shall be levied on such services at a lower rate which saves substantial amount as compared to the previous regime.
Further, staying in a good hotel is going to be very costlier as the rate of tax has been doubled from 9% to 18%. Even Luxury Hotels of 5 stars or above-rated charging room rent Rs. 7,500/- or above will attract 28% tax.