GST on Domestic Tour Packages India 2026: 5% Rate, ITC, Compliance

GST on Domestic Tour Packages: Overview

Domestic tour packages in India are subject to GST under Schedule II (services). Two taxation methods available:

1. Package scheme: 5% GST (Notification 11/2017-CT(Rate) entry 6(c)) - no ITC
2. Component scheme: Each component taxed separately (12%-18%) - ITC available

Tour operator chooses which method suits business model.

5% Package Rate Scheme

Eligibility

• Tour operator bundles two or more services (hotel, transport, sightseeing, meals)
• Entire package priced as single offering
• Invoice shows single tax rate (5%)
• Payment received from domestic customer

Rate

• 5% GST on entire package consideration
• Applied on package value, not components separately
• Example: Rs 50,000 package = Rs 2,500 GST

Mandatory Condition

• No ITC claim on any inputs (hotel bills, transport, activity costs, employee meals)
• Cannot claim ITC on GST paid on input services
• Cannot use ISD (Input Service Distributor)
• Mutually exclusive: operator either takes 5% rate OR claims ITC

When to Opt

• Low ITC benefit (minimal input costs)
• Transparent pricing for customers
• Simplified compliance

Component-Wise Taxation

If tour operator does NOT opt for 5% package scheme, each service is taxed separately:

When to Use Component Scheme

• High input costs (significant ITC available)
• Mixed services (hotel + activity + transport)
• ITC benefit exceeds 5% GST burden

ITC Eligibility

• ITC available on input services if output service subject to GST
• Hotel ITC claimable if tourist accommodation is service supplied
• Transport ITC claimable if passenger transport
• Restrictions: No ITC on meals, alcoholic beverages (Section 17(5))

Air Tickets Within Package: Special Rule

Air tickets have standalone tax treatment even within package:

Rates

• 5% GST: Economy class tickets
• 12% GST: Business class, premium tickets
• 0% GST: Tickets for flights to/from countries with DTAA

Why Separate Taxing

• Air transport is separate service schedule
• Ticket portion cannot be bundled at 5% package rate
• Invoice must disaggregate flight charges

Example

• Package: Rs 50,000 (hotel Rs 20k + flight Rs 25k + activity Rs 5k)
• If using 5% scheme:
  • Flight (5%): Rs 25k = Rs 1,250 GST
  • Hotel (part of package at 5%): Rs 20k = Rs 1,000 GST (at package rate, not 18%)
  • Activity (part of package at 5%): Rs 5k = Rs 250 GST
  • Total: Rs 3,500 GST

Wait, this needs clarification. Actually, if opting for 5% package scheme, the entire package (including flight) is taxed at 5% on the bundled value. But airline itself is separately charged? Let me reconsider based on CBIC guidance...

Actually, if tour operator sources flight ticket from airline and includes in package, the operator can charge customer at 5% package rate if opting for package scheme. Airline is separate supplier. Clarification: if tour operator includes airline ticket in package, entire package taxed at 5%. Standalone air ticket sale = 5% (economy) or 12% (business).

Domestic vs Inbound Packages

Domestic Packages (Indian tourists)

• Subject to 5% or component-wise GST
• Charged within India
• ITC available (if component scheme)

Inbound Packages (Foreign tourists)

• ZERO-RATED (export of services)
• Condition: Payment in foreign currency, tourist is non-resident
• No GST charged to foreign customer
• ITC on inputs available (blocked)
• Example: Rs 50k package for US tourist (payment in USD) = Rs 0 GST

Key Difference

Inbound = export = 0% GST, regardless of 5% or component scheme.

E-Commerce Platform TCS Obligation

Online travel platforms (MakeMyTrip, Goibibo, Yatra, Cleartrip) collect 1% TCS from tour operators under Section 52 CGST Act.

Mechanism

• Platform collects 1% TCS on package consideration
• TCS paid to government
• Tour operator claims TCS credit in GSTR-3

Example

• Tour operator sells Rs 50k package via MakeMyTrip
• Platform deducts Rs 500 (1% TCS)
• Operator nets Rs 49,500
• Operator claims Rs 500 credit against GST liability

Platforms Subject to TCS Rule

• Online travel aggregators
• E-commerce operators facilitating tour sales
• B2B portals connecting operators to customers

Worked Example: Rs 50k Domestic Package

Scenario: Operator sells 3-day Goa package (hotel 2 nights, car rental, sightseeing).

Component Pricing:

• Hotel (2 nights): Rs 20,000
• Sightseeing/activity: Rs 15,000
• Car rental (transport): Rs 10,000
• Meals: Rs 5,000
• Total: Rs 50,000

Option 1: 5% Package Scheme

• GST @5%: Rs 50,000 × 5% = Rs 2,500
• Total cost to customer: Rs 52,500
• No ITC on input costs
• Operator liability: Rs 2,500 GST (minus input GST already paid, if any)

Option 2: Component-Wise Scheme

• Hotel @12%: Rs 20,000 × 12% = Rs 2,400
• Activity @18%: Rs 15,000 × 18% = Rs 2,700
• Transport @5%: Rs 10,000 × 5% = Rs 500
• Meals @5%: Rs 5,000 × 5% = Rs 250
• Total GST: Rs 5,850
• Total cost to customer: Rs 55,850
• ITC available on input GST (hotel bills, transport costs paid to suppliers)

Comparison: 5% scheme saves customer Rs 3,350 GST but restricts ITC for operator.

Compliance Checklist for Tour Operators

GST Registration

• Register if turnover exceeds Rs 20 lakh (goods) or Rs 10 lakh (services)
• Tourism services classified under Section 995321 (SAC code)

Invoice Requirements (if 5% scheme)

• Mention "Package rate 5% GST" or similar
• Show total package value
• Show GST amount (5% of total)
• Invoice date, number, tour operator details

GSTR Returns

• GSTR-1: Report packaged service supplies
• GSTR-3B: Report GST liability (5% if package scheme, component rates if opted)
• Monthly filing (if turnover >Rs 1.5 crore, fortnightly)

Input Documentation

• If 5% scheme: Keep bills but note ITC is not claimed
• If component scheme: Maintain GST invoices from suppliers (hotel, transport, activity providers)

e-Invoicing

• Mandatory if turnover >Rs 10 crore (from 1 Oct 2024)
• If threshold < Rs 10 crore, optional but recommended

TCS Management (e-commerce sales)

• Track 1% TCS deducted by platforms
• Claim TCS credit in GSTR-3B
• File reconciliation report quarterly

Common Pitfalls and Penalties

Pitfall 1: Bundling Air Tickets at 5%

• Error: Including standalone airline charges in 5% package
• Penalty: Demand for differential GST (if air ticket is 5% base but taxed at 5% package, no issue; but if business class at 12%, demand applies)
• Fix: Separately invoice airline charges

Pitfall 2: Claiming ITC After Opting for 5% Scheme

• Error: Deducting input GST while charging customer 5% package rate
• Penalty: Section 73 + interest (1% per month)
• Fix: Clearly decide at start of financial year: 5% scheme (no ITC) or component scheme (ITC available)

Pitfall 3: Not Filing TCS Credit

• Error: Platform deducts 1% TCS but operator doesn't claim credit in GSTR-3B
• Penalty: TCS not credited, operator overpays GST
• Fix: Maintain TCS certificates from platforms, claim in quarterly GSTR-3B

Pitfall 4: Under-Reporting Foreign Tourist Packages as Domestic

• Error: Charging domestic GST on inbound packages
• Penalty: Demand + interest if discovered in audit
• Fix: Maintain documentary evidence of foreign payment (wire transfer, USD invoice)

FAQ

Q: Can tour operator opt for 5% scheme for some packages and component scheme for others?

A: Yes. Tour operator can choose per package basis. However, for administrative clarity, most operators choose one scheme annually and apply consistently.

Q: If foreign tourist pays via Indian rupee bank transfer, does 0% GST apply?

A: No. Currency of payment is not determinative. Key test: Is tourist a non-resident? Is tour provided to non-resident? If yes, 0% applies even if payment in INR. Document tourist's passport/visa to prove non-resident status.

Q: Does 5% package scheme apply to corporate team-building packages?

A: Yes, if supplied to domestic customer (corporate entity). Corporate team-building = domestic package, 5% GST or component-wise taxing applies.

Q: Can hotel directly bill tourist and operator claim ITC on hotel's GST invoice?

A: Yes, if hotel bills operator (not tourist directly). Operator must be in supply chain for ITC claim. If hotel bills tourist directly, operator cannot claim ITC unless operator receives GST invoice.

Q: Is there input tax credit limitation on meal costs in packages?

A: Yes. Meals (food services) have Section 17(5) restrictions. ITC on meal costs is blocked unless supplied as employee meal or specific exemption applies. For tourist meals in package, ITC is not available.

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Source: CGST Act 2017, Notification 11/2017-CT(Rate), Section 52 (TCS), Circular 184/2023-GST (package rates), CBIC guidelines