GST on Tour Package in India — 5% or 18%?

Both are valid — it is the operator’s choice. The concessional route is 5% on the whole composite package with no ITC, ideal for budget and mid-range tours. The alternative is 18% with full ITC, which can be cheaper net-of-credit for luxury tours carrying heavy input GST on hotels and air. The rate must be applied consistently.

The tour-operator scheme itself (5% without ITC or 18% with ITC under SAC 9985) was not changed by the GST 2.0 rationalisation effective 22 September 2025. However, GST 2.0 changed the rates on components a package bundles — hotel rooms up to ₹7,500 moved from 12% to 5% (no ITC), and business/premium air tickets moved from 12% to 18% (economy stays 5%).

Tour operator services fall under SAC heading 9985, with the more specific SAC 998552 used for tour operator/package booking services. The tax invoice for a composite package should mention the SAC and clearly state whether it is taxed at 5% without ITC or 18% with ITC.

A tour operator arranges and sells complete package tours and is taxed on the whole package value at 5% (no ITC) or 18% (with ITC). A travel agent is an intermediary who books travel, hotels or airlines on a client’s behalf and is taxed at 18% only on the commission or service fee — not on the full booking value. One entity can be both, applying 5%/18% to the package portion and 18% to the commission portion.

A travel agent’s commission or service fee is taxed at 18% GST under SAC 9985. Importantly, the 18% applies to the commission/fee earned, not to the full value of the flight or hotel booked. Travel agents on the 18% rate can claim ITC on their eligible business inputs.

Under the 5% concessional scheme, ITC is blocked on all inputs — hotel bills, transport, air, guide fees and vehicle hire. To claim full ITC, the operator must instead opt for the 18% rate. This makes financial sense when input costs are high, such as luxury tours where hotel and air bills carry substantial GST. Operators should apply one route consistently.

Yes, on high-cost tours. At 5% you charge less but absorb all input GST as a cost; at 18% you charge more but recover input GST as credit. On a premium tour packed with ≥₹7,500 hotel rooms and business-class air (both attracting 18% input GST), the credit recovered can outweigh the higher headline rate, making the 18% route cheaper net-of-credit.

When an Indian tour operator sells an international package to an Indian customer, the supply is considered to occur in India, so the full package value — including the foreign hotel and transport portion and any forex margin — is taxable in India at 5% (or 18% with ITC). There is no zero-rating because the recipient is in India. Only genuine B2B exports to a recipient outside India can be zero-rated.

Yes. An inbound tour arranged in India (hotels, transport, sightseeing within India) is a supply performed in India and is taxable here — generally at 5% as a composite package or the components’ own rates. Zero-rating as export of service is narrow and depends on the recipient being located outside India and other export conditions being met.

Registration is mandatory once aggregate turnover crosses ₹20 lakh (₹10 lakh for special-category states). It is also mandatory regardless of turnover if you make inter-state supplies or sell through an e-commerce operator such as an online travel platform. Once registered, you file GSTR-1 and GSTR-3B and the annual GSTR-9.

No. The composition scheme is not available to tour operators or travel agents — service providers face a much lower composition eligibility limit and the scheme is excluded for inter-state suppliers and e-commerce sellers, which most travel businesses are. Tour operators must register under the regular scheme and choose the 5% no-ITC or 18% with-ITC route.

A Letter of Undertaking (LUT) is needed only where you supply zero-rated export services without paying IGST — for example a genuine B2B tour service to a recipient outside India. Outbound packages sold to Indian customers are taxable in India and do not use an LUT. Get your place-of-supply position confirmed before relying on export treatment.

When billed separately, hotel rooms from ₹1,001 to ₹7,500 per night attract 5% (no ITC) and rooms above ₹7,500 attract 18% (with ITC) after GST 2.0; economy air tickets are 5% and business/premium class 18%. Inside a 5% composite package, though, the whole bundle is taxed at 5% and these component rates become blocked input costs rather than separate charges.

Renting a cab or taxi for passenger transport is generally taxed at 5% without ITC on the fuel-inclusive rate. When it is bundled inside a composite tour package, it forms part of the single package supply taxed at 5% (or 18% on the ITC route) rather than being billed as a separate line.

Issue a tax invoice showing the SAC (9985 / 998552), the package value and the GST clearly at either 5% without ITC or 18% with ITC — chosen consistently. Any commission earned as a travel agent should be invoiced separately at 18%. Keep documentation of your rate choice and reconcile ITC in GSTR-2B if you are on the 18% route.