GST - Air Travel Agent - Mark-up - Service Charge

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GST - Air Travel Agent - Mark-up - Service Charge


Lot of questions are coming everyday regarding mark-up / service charge on Air tickets. This article may answer some of the questions of Travel Agent / Agency. Before we take some of the example lets understand some points.

Please don't mix with the Commission / PLB / Deposit Incentives / Segment incentives that you earn through airlines. In this case 18% of Total earning have to be paid as tax and will be paid as 9% CGST & 9% SGST. Note on the commission there will be no IGST. So in layman words your earning from airlines commission have been burden by 18%.

Second earning of Agent was through Mark-up or service charges collected from the customer for providing the Tickets. And to handle the Mark-up or service charge please keep the below points in mind.

  1. You can't issue a consolidated Tax Invoice amount to your Customer. As for consolidated Tax Invoice single transition amount should not exceed Rs. 200/- and you know there is no service in travel agency whose value will be less than Rs. 200/- as it happens in Grocery shop or else were.
  2. Since your value will above Rs.200/- you have to issue a Tax Invoice for every transition you perform.
  3. You can't issue a Invoice with a term "WALK-IN CUSTOMER" as Under GST Law taxes is destination based tax and based on that CGST + SGST or IGST is Charged. Click here to Know more about CGST, SGST, IGST   
  4. Before Invoicing any Customer ask for complete address including STATE he lives.
MARK-UP or SERVICE CHARGE have a TAX of 18% and have to be shown on Invoice you issue with bifurcation if required like CGST, SGST, IGST.

How to find the case of CGST, SGST & IGST ? Will try to understand with the 2 Example.

Please Note this is for Service Charge / Mark-up case only.

Example 1 (Case of CGST + SGST)
Your Agency is based in Chennai (Tamil Nadu), A customer from Madurai (Tamil Nadu) walks in to your office and ask for a ticket from Delhi - Mumbai. You tell the fare of Rs. 6500/- Which includes a mark-up of Rs.500/-. So in this case Cost of Ticket is Rs.6000 + Rs.500/- is mark-up. The deal is done and you issue the ticket and the customer asks for the Bill. And now you have to issue the bill.

????

Point 1 
Here Agency and Customer is both from same state and you are asking a service charge / Mark-up the Tax will be 9% CGST + 9% SGST.  as the service charge is within the state. You can't Charge tax on the print cost of air ticket issued by the airlines. Details click here. In this case you will have to mentions the following details on your invoice.
  1.  Complete Address of your Customer including STATE.
  2.  Cost of Ticket including Sector and Airlines Reference No. / PNR / Ticket No. Here as taken from above Example is Rs. 6000/-
  3. Service Charge of Rs.424/- (Less 18% of your mark-up of Rs.500/-)
  4. CGST @ 9% on Rs.424/- = Rs.38/-
  5. SGST @ 9% on Rs. 424/- = Rs. 38/-
Total (Rs. 6000 + 424 + 38 + 38) = Rs. 6500/-

Point 2 
If you have asked the customer that on the cost of Rs. 6000/- Our agency will charge Rs. 500 + Taxes. You would have Billed in following method.

  1.  Complete Address of your Customer including STATE.
  2.  Cost of Ticket including Sector and Airlines Reference No. / PNR / Ticket No. Here as taken from above Example is Rs. 6000/-
  3. Service Charge of Rs.500/- 
  4. CGST @ 9% on Rs.500/- = Rs.45/-
  5. SGST @ 9% on Rs. 500/- = Rs. 45/-
Total (Rs. 6000 + 500 + 45 + 45) = Rs. 6590/-

HERE "IGST" WILL BE CHARGED ON THE INVOICE / TICKET OF AIRLINES

Example 2 (Case of IGST on Service Charge / Mark-up)
Your Agency is based in Chennai (Tamil Nadu), A customer from Munnar (Kerala) walks in to your office and ask for a ticket from Delhi - Mumbai. You tell the fare of Rs. 6500/- Which includes a mark-up of Rs.500/-. So in this case Cost of Ticket is Rs.6000 + Rs.500/- is mark-up. The deal is done and you issue the ticket and the customer asks for the Bill. And now you have to issue the bill.


Point 1 
Here Agency and Customer is both from different state and you are asking a service charge / Mark-up the Tax will be 18% IGST.  as the service  is inter-state. You can't Charge tax on the print cost of air ticket issued by the airlines. Details click here. In this case you will have to mentions the following details on your invoice.
  1.  Complete Address of your Customer including STATE.
  2.  Cost of Ticket including Sector and Airlines Reference No. / PNR / Ticket No. Here as taken from above Example is Rs. 6000/-
  3. Service Charge of Rs.424/- (Less 18% of your mark-up of Rs.500/-)
  4. IGST @ 18% on Rs.424/- = Rs.76/-
Total (Rs. 6000 + 424 + 76) = Rs. 6500/-

Point 2 
If you have asked the customer that on the cost of Rs. 6000/- Our agency will charge Rs. 500 + Taxes. You would have Billed in following method.

  1.  Complete Address of your Customer including STATE.
  2.  Cost of Ticket including Sector and Airlines Reference No. / PNR / Ticket No. Here as taken from above Example is Rs. 6000/-
  3. Service Charge of Rs.500/- 
  4. IGST @ 18% on Rs.500/- = Rs.90/-
Total (Rs. 6000 + 500 + 90) = Rs. 6590/-



Post a Comment

30 Comments

  1. Hi I need a clarification.
    I will not be charging any service charge to the client. I will sell the ticket to client at the same cost of Rs. 6000 then how do I invoice. should i invoice the ticket without GST.
    then the airline will pay me a commission after 15 days of 3% on the booking value which is around Rs. 180
    Now on this Rs. 180 which is received as commission from Airline i will be liable to pay 18% GST [Rs. 32.4] will this be deducted by the airline and paid to the Government or should we pay from our end.
    Can you please explain ASAP.

    ReplyDelete
    Replies
    1. Dear Mr Chandra Skekar, Please note even if you don't charge GST on Invoice, the Invoice must show your GST No.

      Since you are selling the ticket on Rs.6000/- You will show the sector, pnr / ticket no. and in price section you will mention rs 6000/- and Net payable amount will be Rs.6000/- and you will collect Rs.6000/- from your customer.

      2nd when you receive Rs.180/- either Rs.32.40 will be paid by you directly to the government OR If Airlines deposits the amount to the Govt. account you will take the input of the same amount.

      Delete
  2. Hello Sir,

    By that means we have to provide the our mark up which is not good for business, how can we hide this.

    ReplyDelete
  3. I mean to say if we get ticket in lower price say 4000 but in normal sites its available at 5000 then we usually put 500 mark up which we dont want to show to the customer , corporate or business, what should be best way to deal this.

    ReplyDelete
    Replies
    1. Hi! Saurabh,

      Going through your question. If you will tell your customer that we have 2 rates one of Rs.5000/- and another fare of Rs.4000/- which is available with us but on spl. fare we will charge Rs.500 + GST. Do you think the customer will say no. place your self on this example / case. What you or customer will think in his mind. Some think like below mentioned.

      1. Rs. 410 lesser than the actual and no one can say they don't want discount.

      2. You will able to establish your firm transparency.

      3. Next time the customer may ask for the same type of fare and hope that they may become your permanent customer.

      and so on.

      Feel free to ask more about GST.

      Delete
  4. WHAT IS SAC CODE APPLICABLE FOR MARKUP/ SERVICE CHARGES FOR BOOKING OF AIR TKT

    ReplyDelete
    Replies
    1. use SAC code 998554, Service Description Reservation Services For Event Tickets, Cinema Halls, Entertainment And Recreational Services And Other Reservation Services

      Delete
  5. use SAC code 998554, Service Description Reservation Services For Event Tickets, Cinema Halls, Entertainment And Recreational Services And Other Reservation Services

    ReplyDelete
  6. I am fully agree with you Sir. I have also opined my clients in the same line. However, they do fear of disclosure of mark-up to their clients as by this way, their customer will know the amount of mark-up. So, they have started the practice of issuing Inclusive Tax Invoice to the customers. I think, this is not a valid practice. What u say?

    ReplyDelete
    Replies
    1. Dear Sir,

      You can tell the facts and truth. but you cann't force any one for doing the right practice. Keep promoting the truth.

      If Your clients keep on doing the same they will suffer as every thing is transparent and available online.

      Delete
  7. Hi Bibhuti,

    Great explanations...

    Just hv a small doubt --

    Few travel agents are charging 18% on the ( 5% on domestic and 10% on international of the basic fare ) as GST and no GST on the mark ups. Is it a correct procedure !

    Also in our travel portal Mark up can be added in the tax segment of the total Airline fare ....is it right thing to do! We are doing it at present but due to the GST regime please let us know how to calculate the GST on the mark up if its part of the tax!

    Thanks.

    ReplyDelete
    Replies
    1. Charging 18% on the ( 5% on domestic and 10% on international of the basic fare ) is not the correct procedure. You have to pay 18% of your commission. and Few airlines don't part any commission too. secondly once you pay the 18% GST in Govt. account please bill the amount to the respective supplier or airlines and they will revert back this amount and there will be input of tax by airlines. In this case agent is not burdened by tax liability as he gets the amount back from the supplier or airlines.

      Regarding markup on travel portal you can calculate the the GST as explened below:

      Suppose there is a markup of Rs. 1000/- than in this case filter use this formula : 1000 / 118 x 100 = Rs.847.46 as Mark-up / Service Charge and rest Rs.152.54 as GST which have to be bifurcated in GCST + SGST or IGST best on the actual supply of services

      Delete
  8. Dear Mr. Bibhuti,

    Excellent ...thanks for the clarification.

    so in case the Airline ticket breakup is --

    Base - 10783 + OT tax 834 + airline K3/GST 558 = GROSS 12175

    AIRLINE COMM - 551.47

    NET TO US - 22323.52

    OUR MARK UP TO THE CLIENT ADJUSTED IN THE PORTAL AS TAX - RS 1000

    SO OUR TICKET VALUE LOOKS LIKE -

    BASE 10783 + TAX (834+1000 =1834) + AIRLINE GST 558 = 13175/-

    So in actual it should have been as per your suggestion -

    BASE 10783 + TAX (834 + 847.46) + AIRLINE GST 558 = 13022.46/-

    When we raise the commercial invoice to the client -

    We should be charging 13022.46 + IGST 18% on 152.54

    Pls adv if I am correct.

    Thanks.

    Manish

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. Dear Manish,

      Don't make your self so complicated with the calculation. You can bill your customer in below pattern. All figures taken from your doubt only.

      While bill to the client / customer in this case. Make 2 services in a single invoice.

      1. Cost of Airlines ticket (For Your Reference you can mention PNR/Ticket no. / Sectors) = Rs. 12175/-

      2. Service Charge for booking Ticket = Rs.1000/-

      In the Tax section Mentioned on Invoice Add : 18% GST i.e. Rs. 180/- (PLEASE BIFURCATE THE GST AS CGST @ 9% + SGST @ 9% / OR IGST @ 18% DEPENDING UPON THE ACTUAL SUPPLY)

      SO TOTAL BILL AMOUNT = Rs. (12175 + 1000 + 180) = Rs.13355/-

      Now for the Tax Deposit the amount you have to pay is as in this case : Rs. 180/- on service charge + Rs. 99.26 (18% of Rs.551.47 on Commission) NOW THE QUESTION IS THAT HOW TO COLLECT Rs.99.26 OF TAX AMOUNT YOU PAID TO GOVT. FROM YOUR COMMISSION.

      For Rs. 99.26/- Please issue the Bill to the respective Airlines / Supplier and they will return this amount to you in your account and they will take the input of this amount. so there is no loss of single rupee on the commission earned by the agent.

      Hope this may clear the way of invoicing to the customer.

      Please contact us for GST filling. Yes its chargeable.

      Delete
  9. Dear Mr. Bibhuti,

    Thank you very much for your guidance and support. Much appreciate.

    Regards

    ReplyDelete
  10. Dear Bibhuti sir

    Can a travel agent get rebate 5% of gst. Which is paid to airlines.

    ReplyDelete
    Replies
    1. No travel agent will not get the rebate of 5% of GST charged by airlines. Except if the ticket is used by the agency for there own business purpose.

      Delete
  11. Hello sir
    What if I am getting a good deal. And my mark up is around 40k on business fare. I can't show such a huge mark up to my client. How do I deal with this.

    ReplyDelete
  12. Hi sir which method is right as per GST rule in above you given point 1 in which mark up including gst and in point 2 mark up plus gst which one shall we use point 1 or point 2 or we can use both? Normally while quoting customers we say it includes all.

    ReplyDelete
  13. we are travel agency we donot have walk in clients we work mostly with corporates they take credit upto months or two that is for also 10 to 20 lakhs,
    we have to add markup, that we do not want our customer to see, but we will pay the gst to the govt for how much mark up is added, how to hide mark up, by showing customer it very hard to earn 500 but hidden 2000 or 3000 can be charged

    ReplyDelete
  14. I am a corporate taking services from a travel agent. They issue ticket with GST. But how can I file GST returns? Does the airline also provide an invoice for filing tax returns? Please explain how to take input credit if I am booking through a travel agent for my employees.

    ReplyDelete
  15. In certain cases we may have to sell the tickets to our clients at our net purchase rate, especially while bundling with tour packages. In these cases the earnings from ticket booking is nil (even after discounting airline commissions). Is there any need to file GST returns for the same ?

    ReplyDelete
  16. what will be the taxable value as per gstr 3b
    Do we need to also enter the flight ticket cost as exempted in3b

    For example in april i have sold airtickets of 300000 + mark up/ser veices charges of 10000 + igst = 18000

    then while filling 3b do we need to enter the value of air tickets also if yes where
    (b) Outward Taxable supplies (zero rated )
    (c) Other Outward Taxable supplies (Nil rated, exempted)
    (e) Non-GST Outward supplies

    ReplyDelete
  17. A business travelers does wouldn't fret on spending some additional money while purchasing an air flight tickets hotel reservations

    ReplyDelete
  18. I couldn't find any knowledge on this matter prior to.Also operate a site and if you are ever interested in doing some. https://www.kplokusa.com/mbft-series-sb-and-bleed-valve/

    ReplyDelete
  19. I book 1 air ticket for my client from my friend travel agency in delhi. He give me invoice with his gst no. Mention on the invoice like this

    Air ticket client name and travel date — 239000

    Total. 239000

    No gst mention.

    Now can in make invoice for my client in following method.

    Air ticket 239000
    Service charge 4000
    18 % GST on service charge - 720
    Total 243720



    But I don’t have invoice from direct airline. I have invoice the travel agency from I book the ticket


    Looking for your help

    ReplyDelete
  20. Hi,

    Very informative explanations.

    Can the supplier charge both TDS & GST on travel agent commissions?

    ReplyDelete
  21. Hello Sir

    Some a portal charged 5% TDS on commission earned (Not 18% GST on commission).

    In case airline ticket breakup is
    Base fare : 13,319, Other Taxes :578, K3 : 668 = 14,565 (Gross fare)
    Less (Commission earned ) = -327.65
    Add (TDS deducted 5% of comm) = 16.38
    Nett Payable Amount 14254/-

    Can you please advice me how to raise tax invoice if I sell it @14,500
    How to get ITC ?

    ReplyDelete
  22. Can you please share your email ID for any advice in billing?

    ReplyDelete