The recent GST reforms announced at the 56th GST Council meeting are set to reshape the travel and tourism industry in India, with travel agents standing at the center of both opportunities and challenges.
For hotel accommodation priced up to ₹7,500 per day, the GST rate has been reduced from 12% with input tax credit (ITC) to 5% without ITC. While this move makes travel more affordable for consumers, it poses challenges for travel agents who lose ITC benefits, potentially compressing margins.
Non-economy class air travel has seen its GST rate increased from 12% with ITC to 18% with ITC. This change will result in higher fares for business travelers, yet travel agencies serving corporate clients can still claim full ITC, ensuring better cash flow management.
One of the most significant developments is the amendment of Section 13(8)(b) of the IGST Act, which now allows services provided by travel agents and tour operators to foreign clients to qualify as exports. This recognition not only enables agencies to avail zero-rated benefits under GST, including refunds of input tax credit, but also strengthens their ability to compete globally.
The motor vehicle transport sector has also undergone changes. The GST rate remains at 5% without ITC, but for those opting for full ITC, the rate has risen from 12% to 18%. This provides flexibility but also calls for agencies to carefully evaluate their business models.
Commenting on the reforms, Jyoti Mayal, Chairperson of the Tourism and Hospitality Skill Council, said: “The latest GST reforms bring both relief and responsibility for travel agents. On one hand, reduced hotel tariffs will stimulate demand in the domestic tourism segment. On the other hand, the removal of ITC in this category will require agents to realign their pricing strategies. Most importantly, the recognition of intermediary services as exports is a game-changer, unlocking opportunities for Indian travel businesses to expand their global footprint while enjoying the benefits of zero-rated taxation. luxury travel is as important and needs to be promoted more as the returns are higher spends are higher it is exclusive travel and india needs to focus in the same for inbound and be more competitive than the neighbouring countries”
As the sector adapts to these changes, the emphasis will be on balancing consumer affordability with sustainable business models, ensuring that Indian travel agents remain competitive both domestically and internationally.
