GST on Tour Operators & Travel Agents 2026 — 5% or 18%?

Updated: 3 June 2026 | CGST Act 2017 | Notification 11/2017-CT(Rate) + Circular 163/2021

Tour operators selling packaged holidays (hotel + flight + transport bundled) charge 5% GST on total package value with no ITC on inputs. Travel agents acting as pure intermediaries (only booking, earning commission) charge 18% GST on their commission/service fee and can claim ITC on their own business expenses. Online platforms like MakeMyTrip operate both models depending on the booking type.

5% vs 18%

5% — Tour operator packaging holidays | 18% — Travel agent's commission
5% rate comes with blocked ITC on hotel, airlines, transport inputs. 18% rate allows full ITC on business expenses.

GST Rates — Travel & Tourism Services

Service Type	GST Rate	ITC Allowed?	Who Pays
Holiday package (hotel + flight + transport)	5%	No — blocked on inputs	Tour operator charges client
Travel agent commission / service fee	18%	Yes — on business expenses	Agent charges client on fee portion
Air ticket booking fee by agent	18%	Yes	Agent's convenience fee only; airline charges 5%/12% separately
Hotel booking fee by agent	18%	Yes	Agent's commission only; hotel charges 12%/18% separately
Domestic holiday package (India travel)	5%	No	Tour operator
Inbound tour (foreign tourists in India)	5% (if supplied in India)	No	Tour operator; 0% only if paid in forex by foreign entity
Outbound tours (India → abroad)	18% on Indian service portion	Yes	Tour operator; foreign portion zero-rated
Visa processing service	18%	Yes	Agent or tour operator on their service fee
Travel insurance	18%	Yes (business use)	Insurance company or agent
OTA convenience fee (MakeMyTrip, Yatra)	18%	No (consumer purchase)	OTA charges traveller

Tour Operator vs Travel Agent — Key Differences

Aspect	Tour Operator	Travel Agent
Role	Principal — buys services and resells as package	Agent — books on client's behalf, earns commission
GST rate charged	5% on total package value	18% on commission/service fee only
ITC on hotel/airline costs	Blocked — cannot claim	Not applicable (hotel charges client directly)
Invoice	Own invoice for full package price	Invoice only for own fee; principal invoice from hotel/airline
Risk	Bears inventory/booking risk	No risk; earns fee regardless of margins
GST registration threshold	₹20L turnover (inter-state: mandatory regardless)	₹20L aggregate turnover

ITC Blocking for Tour Operators — Practical Impact

When a tour operator charges 5% GST on a ₹1,00,000 holiday package, here is how the ITC blocking plays out:

Tour operator collects 5% GST from client
On a ₹1,00,000 package: GST collected = ₹5,000. This goes into the tour operator's GST liability (to be paid to government in GSTR-3B).
Operator pays hotel (12% or 18% GST on hotel's bill)
Hotel charges ₹60,000 + 18% GST = ₹10,800 hotel GST. This is an input. Under normal GST, the operator could claim ₹10,800 ITC. Under the 5% tour operator scheme, this ITC is blocked — not claimable.
Operator pays airline (5% GST on economy tickets)
Airline tickets cost ₹30,000 + ₹1,500 GST. Again, ITC of ₹1,500 is blocked under the 5% tour operator scheme.
Net impact: higher cost but simpler compliance
The blocked ITC (₹10,800 + ₹1,500 = ₹12,300) becomes a cost. But compliance is simpler — no complex ITC reconciliation. Many operators build the blocked ITC cost into their package pricing.
Alternative: Charge 18% with full ITC
A tour operator can opt to charge 18% GST on the package and claim full ITC on hotel, airline, and transport inputs. This makes sense if ITC savings exceed the competitive advantage of the 5% client-facing rate. Useful for B2B corporate travel bookings where the corporate client can also claim ITC.

Frequently Asked Questions

What is the GST rate on holiday packages in India?

A tour operator offering a holiday package that bundles hotel + flights + transport + meals + guide pays 5% GST on the total package value. The critical condition is that the tour operator cannot claim any Input Tax Credit on inputs (hotel bills, airline tickets, transport costs) when charging this 5% rate. This 5% rate applies to both domestic holiday packages (within India) and inbound tourism packages (foreign tourists visiting India). For outbound packages (Indian tourists going abroad), the services are treated as export of service, meaning 0% IGST applies to the foreign component, though the operator must carefully separate domestic vs international service elements.

What is the GST rate for travel agents vs tour operators — 5% or 18%?

The key distinction is whether the business is acting as a principal (tour operator) or an agent (intermediary). Tour operator (packages own product): 5% GST on total package value, no ITC on inputs. Travel agent (books on behalf of client, earns commission): 18% GST on the commission or service fee charged to the client. For example, if you book a ₹50,000 hotel stay for a client and charge ₹2,000 as booking fee/commission, you pay 18% GST on ₹2,000 = ₹360 GST. The hotel directly charges GST to the client. This distinction matters enormously for pricing, compliance, and ITC claims. Many OTAs (online travel agencies) operate both models simultaneously on different bookings.

Can tour operators claim ITC on hotel bills, airline tickets, and transport?

No. Tour operators charging 5% GST on packages cannot claim Input Tax Credit on their inputs — specifically hotel accommodation costs, airline tickets, transport charges, and other service costs that form part of the package. This is an explicit condition of the 5% concessional rate. If a tour operator wants to claim ITC on inputs, they must charge 18% GST on the package instead of 5%. In practice, most tour operators choose 5% without ITC because: (1) the 5% rate is more competitive for clients, (2) many of their input services (like airline tickets at 5%) carry very little ITC anyway, making the trade-off favorable. Travel agents charging 18% on commission CAN claim ITC on their business expenses (office rent, software, staff travel for business).

Is GST charged on services to foreign tourists visiting India?

Services supplied to foreign tourists visiting India (inbound tourism) are treated differently based on where the service is consumed. If an Indian tour operator sells a tour package to a foreign tourist and the tour is conducted entirely within India (domestic legs), the service is NOT zero-rated — it is taxable at 5% GST since the place of supply is India (where the tourist physically consumes the service). However, if the same Indian tour operator invoices a foreign company/tour operator outside India for arranging tours for their clients visiting India, and payment is received in foreign exchange, this qualifies as an export of service (zero-rated). The key test is the place of supply and whether consideration is received in convertible foreign exchange from a person outside India.

How does GST apply to online travel agencies like MakeMyTrip or Yatra?

Online Travel Agencies (OTAs) operate under both models: (1) As travel agents/intermediaries: When they book a hotel or flight on your behalf and charge a convenience fee or service fee, 18% GST applies on that fee alone. The underlying hotel/airline GST is charged directly by the hotel/airline. (2) As tour operators: When they sell bundled holiday packages under their own brand (e.g., "MakeMyTrip Holiday Package — Goa 3N/4D including hotel + flight"), they act as a tour operator and charge 5% GST on the total package with no ITC. OTAs also collect TCS (Tax Collected at Source) at 1% on hotel bookings made through them on behalf of unregistered hotel suppliers, as they are classified as E-Commerce Operators under Section 52 of the CGST Act.

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