GST compliance is one of the most misunderstood areas for Indian travel agencies. Get it wrong and you face audits, penalties, and incorrect invoicing that erodes client trust. This guide covers the complete picture for 2025-26.
HSN/SAC Code for Travel Services
Travel agencies providing tour operator services fall under SAC code 9985 (Support services). The specific sub-categories: — 998551: Travel agency services for passenger transportation — 998552: Tour operator services — 998553: Tourist assistance services
Always include the correct SAC code on every invoice. Omitting it is a common audit red flag.
The Big Decision: 5% vs 18% GST
This is where most agencies get confused. Tour operators have two options:
*Option A — 5% GST without Input Tax Credit (ITC)* You charge 5% GST on the total tour package value. You CANNOT claim ITC on hotels, flights, vehicles, or any services purchased to deliver the tour.
*Option B — 18% GST with ITC* You charge 18% GST on your margin (not the entire package value). You CAN claim ITC on all inputs — hotels (hotel's GST paid), transport, meals, etc.
When to choose which: If your tour margins are low (10-15%) and your input costs are high (as in most domestic packages), Option B often results in lower net GST liability. If margins are high (50%+ on premium custom packages), Option A may be simpler. Calculate both for your specific business model.
Composite vs Mixed Supply
GST law treats bundled services differently based on whether they are intrinsically linked:
*Composite Supply:* A naturally bundled service where one element is the principal supply. Example: A flight + hotel + guided tour package where the tour is the principal service. GST applies at the rate of the principal supply (tour = 5% or 18%).
*Mixed Supply:* Services that can be bought separately. Example: A "holiday package" that includes airfare (taxeable at 5% for economy, 12% for business), hotel (12% or 18% depending on room rate), and a spa voucher (18%). In mixed supply, the HIGHEST applicable GST rate applies to the entire bundle. This is often unfavorable — better to invoice items separately when possible.
Inbound vs Outbound Tourism
Inbound tourism (foreign tourists coming to India, paid in foreign currency): 0% GST (zero-rated). You can also claim ITC on inputs for inbound tours.
Outbound tourism (Indian tourists going abroad): 18% IGST on agency margin. The services consumed are outside India, but the agency service is provided from India, making it taxable.
Place of Supply Rules
For B2B transactions between registered businesses: Place of supply = location of service recipient's GSTIN. This determines CGST+SGST vs IGST. For B2C (unregistered individuals): Place of supply = location where the service is consumed/performed.
This matters most for inter-state bookings. A Delhi agency booking a Goa package for a Mumbai client: if client is B2C, place of supply = Goa, so IGST applies.
GST-Compliant Invoice: Mandatory Fields
Every invoice must include: 1. Your GSTIN 2. Client's GSTIN (for B2B) or PAN (for B2C above ₹2 lakh) 3. SAC code for each line item 4. Taxable value per line 5. CGST + SGST (intra-state) OR IGST (inter-state) 6. Place of supply 7. HSN/SAC summary at invoice footer 8. Reverse charge applicability (Yes/No)
2025-26 GST Council Updates
The November 2025 GST Council meeting clarified: — Small travel agents below ₹20L turnover can opt for composition scheme at 6% flat (3% CGST + 3% SGST) with no ITC — Digital booking platforms must collect and remit TCS (Tax Collected at Source) at 1% on B2C transactions above ₹2.5 lakh
Practical Invoice Example
Domestic tour: Kerala Backwaters 5N/6D for 2 adults
| Item | Amount | GST Rate | GST Amount | |------|--------|----------|------------| | Tour Package (SAC 998551) | ₹38,000 | 5% | ₹1,900 | | Total | ₹38,000 | | ₹1,900 | | CGST (2.5%) | | | ₹950 | | SGST (2.5%) | | | ₹950 | | Invoice Total | | | ₹39,900 |
Common Audit Red Flags
— Mismatch between GSTR-1 (outward supplies) and GSTR-3B — ITC claimed on hotel invoices where the hotel has not filed its own returns — Not collecting GST on advance payments — Using wrong HSN code (using goods HSN instead of SAC for services) — Not declaring reverse charge liability when using unregistered vendors