23 May 2023
1 A company's Director is traveling to foreign country for sight seeing as a Hoilday package through the travel agent.
2 He is booking the flight tickets, Train tickets and hotel room bookings etc through the travel agent by paying the certain specified amount charged by the travel agency.
3 These amount is less than Rs 7.00 Lakhs.
4 Foreign travel is going to effect duting June 2023.
The Queries are
a. Whether this travel agency can charge the GST for the entire amount (Ex : Rs 6.75Lakhs.) or only their service charges only.
b In case , if the travel agency does not show their service charges separately, can they charge the GST On the entire transaction amount? (ie on Rs 6.75 Laks)
c In both the above cases, whether this company able to avail the ITC on these transactions, since this trip does not carry out for the business purposes?
d Are there, any other things need to be taken care to avoid the future legal consequences?
11 July 2024
Here are the responses to your queries regarding GST implications for the travel arrangements made by the company director:
a. **GST on Entire Amount vs. Service Charges Only**: - According to GST regulations, the travel agency should charge GST on the entire amount of Rs 6.75 lakhs, which includes the cost of flight tickets, train tickets, hotel bookings, etc. If the travel agency does not separately mention their service charges, GST should be applied to the entire transaction amount.
b. **Separate Disclosure of Service Charges**: - If the travel agency does not show their service charges separately and the total amount billed to the company is Rs 6.75 lakhs, GST should indeed be charged on the entire amount. This is because GST is applicable on the consideration received for providing the service, which in this case includes the total amount paid for the holiday package.
c. **Input Tax Credit (ITC) Eligibility**: - The company will generally be eligible to claim Input Tax Credit (ITC) on the GST paid to the travel agency, assuming the expenses are incurred in the course or furtherance of business. Even though the foreign travel is for sightseeing as a holiday package, if it is undertaken by a director or employee on behalf of the company and is related to the business interests (such as exploring business opportunities, attending conferences or meetings, etc.), ITC can be claimed. The company should maintain proper documentation to support the business purpose of the travel.
d. **Other Considerations**: - Ensure that all invoices and supporting documents clearly indicate the nature of services provided by the travel agency and the GST charged. This documentation will be crucial for claiming ITC. - Verify that the travel agency is registered under GST and that they are charging GST correctly as per the applicable rates and rules. - Keep records of the travel itinerary, purpose of travel (if business-related), and any other relevant documentation that supports the business need for the travel.
By adhering to these guidelines and maintaining proper documentation, the company can ensure compliance with GST regulations and maximize the eligibility for Input Tax Credit where applicable. If there are specific business-related reasons for the foreign travel, clearly documenting these purposes will strengthen the claim for ITC.
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