Travel n Tour

GST in tour and tourism

CA. H.M. Talha Rahman, Partner, Selvarajan & Co., Chartered Accountants, Chennai, speaks at the period approximately what GST would mean for the use of an’s economic system while giving a totally correct and deep expertise about the computation involved for the travel enterprise.

“There is a huge hue and cry approximately GST and those are speculating a lot approximately this. What we fail to understand is that it’s miles a combination of most of the oblique taxes in a brand new shape, which brings the idea ONE NATION ONE TAX.”


The GST changed into implemented effectively with the aid of few international locations many years in the past. I don’t forget having waited in a queue in Singapore Airport for money back of GST 15 years in the past. At that time, Indians used to shop a lot in Singapore which was famous for tape recorders, VCRs, perfumes and different fancy stuff. When we purchase them in Singapore, the cost of the item comes with a factor referred to as the GST which had to be paid via the neighborhood citizens as a final purchaser. But a foreign countrywide may want to claim the refund of GST paid, by way of showing the invoice and goods at the time of departure from the united states of America. Hence It is known as a consumption tax

To put it honestly, “Cascading Tax Effect” approach tax on tax. Previously whilst a producer sells his product, he adds Excise Duty with his promoting charge and sends the goods to the distributor. In turn, when the distributor sells the identical goods to the quit consumer, he provides his profit margin and additionally costs VAT on the delivered fees which include Excise Duty. In other phrases, a tax (VAT) is paid on every other tax (Excise Duty), which has cascading tax impact. Now within the GST era, in this case, both Excise Duty and VAT is clubbed as GST and the GST charged via the manufacturer to the distributor may be adjusted as ITC (Input Tax Credit) thus avoiding the tax on tax.

To provide an explanation for the concept in easy terms, let us anticipate that a distributor referred to as “B” buys one thousand devices of a product from a manufacturer referred to as “A” at a rate of Rs. A hundred in step with the unit. The Invoice via A will appear like this:

SlNo Description No of Units Unit Price Total Amount
1 Sale of Product one thousand 100 1,00,000.00
2 GST @ 12% 12,000.00
3 Total Invoice Amount 1,12,000.00
(In this situation, A collects Rs. 12000 from B as GST and pay the entire quantity to the Government)

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Now allow us to once more assume that B promote all these merchandises to a retailer called “C” keeping 5% as his income margin and his promoting charge will be Rs. 105 in line with the unit. The Invoice of B will seem like this:
Sl.No. Description No of Units Unit Price Total Amount
1 Sale of Product 1000 a hundred and five 1,05,000.00
2 GST @ 12% 12,600.00
3 Total Invoice Amount 1,17, six hundred.00
(Now B Collects Rs. 12600 from C as GST, however, he will now not pay the whole quantity to the Government, instead, he’s allowed to deduct Rs. 12000/- which he has already paid to A as GST and pay only the balance quantity of Rs. Six hundred to the Government. This credit score of Rs. 12000 is called ITC, Inward Tax Credit). If you notice inside the above instance, the tax isn’t levied on tax and as a result, GST will not have any cascading tax effect.


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One of the finest blessings of GST is the seamless waft of “input credit” (please refer the example above: Rs. 12000 paid by means of B closer to GST to A is ITC of B) across the chain and throughout us of a. All taxes (GST) paid to a registered provider for the purchase of goods (which include capital items) and delivery of offerings can be deducted as ITC from the GST amassed from your payments and the balance tax best need to be paid as tax.

There are few exceptions, as an example, the GST paid on Motor Car or Motor Cycles etc with the aid of the non-transport organizations cannot be used as ITC.

Compliances mechanism of GST is going to be a major roadblock for small traders and service providers. Every registered supplier has to record three returns in a month and one annual go back making the overall wide variety of returns to be filed as 37 consistent with annum. These returns are to be filed electronically on a platform called GSTN (GST Network) and requires tremendous knowledge, accuracy, and skill. It is actually tough, if not feasible for small timers to conform with these requirements on a month-to-month basis. It is strongly counseled to use the services of Chartered Accountants or Tax Return Preparers appointed by the department

1. Small Manufacturers, buyers, sellers and service providers whose turnover does now not exceed Rs. 20 lakhs in an economic year are exempt from the registration and price of GST.
2. Composition Scheme: Those small buyers whose turnover exceeds Rs. 20 lakhs however underneath Rs. 75 lakhs can opt for the Composition Scheme which allows them to pay GST at a lower rate to be constant via GST Council, a good way to now not be much less than 1%. But they can not avail ITC and that they can’t adopt any inter-nation transactions.
3. Unfortunately, the small carrier carriers cannot choose the composition scheme.

Tourism Industry and journey and tour agents specifically are dealing with a difficult time because of different factors like no fee by way of the airlines, direct advertising of airlines, higher taxation, negative vacationer infrastructure etc. Their fundamental resources of profits are indexed underneath:
1. Commission from Airlines, Cruise Companies, Travel Insurance Companies etc
2. Sale Tour Packages, both inbound and outbound
3. Travel Related Services like Visa, Passport and so forth.
4. Incentives Received from CRS Companies

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Now we shall deal how GST is calculated on those objects.
Commission from Airlines, Cruise Companies, Travel Insurance Companies etc:
1. One has to remember the fact that an airline or a cruise price tag or the tour coverage policy issued via insurance groups is an agreement among the airline/cruise/insurance corporation and the passenger. The journey agent is best a facilitator who receives the commission from the groups. Hence GST on those price ticket/coverage will best be fed on with the aid of the passenger and the agent can not use them as their input credit.
2. However, the agent has to pay GST on the commission obtained from the airline/cruise/insurance groups on the opposite foundation. (For Example, if the GST is eighteen% and the agent gets Rs. One hundred as a fee, he has to pay only Rs.15.25 (one hundred-a hundred/118%) as GST). This amount of Rs. 15.25 should not be collected from the passenger.
3. If the agent collects Service Fee as an extra price from the passenger and shows it inside the invoice one after the other, he can add GST on the service rate in the bill and gather the equal from the passenger.