Input Tax Credit or ITC is claiming the credit of GST paid on purchase of goods or services (like travel), which use for the furtherance of business.
In India, there are four significant modes of travelling – air, rail, road, and sea
Air: If the passenger wants to reach their destination faster and in less time, then obviously he will choose to go by air. However, this mode of travel comes at additional cost like security fees, handling charges, duty costs, higher GST rates, etc. Accordingly, this makes it a costly affair to travel.
Also Read: Rules Related to Setting Off of Input Tax Credit
Rail: The railways are considered to be one of the best modes of travel. And, it is not only because of the convenience but also due to its low prices (less or no GST at all)
Road: Travelling by road is the most common mode of travel across all the States. The shorter distances can be easily covered through public transport like bus/radio taxes/cabs at a cheaper price.
Sea: Travelling by sea is the least common mode of travel. However, one can still choose to travel between the nations through the means of sea.
Can you claim Input Tax Credit on Travel?
Input Tax Credit can be claimed only if it is used in furtherance of business. In simple words, ITC on travel can be claimed only if, the same has been used for the business purpose. In other words, you can not claim ITC, in case the travel is for personal purposes.
Further, ITC is also not available in case of travel and benefits extended to employees on vacation such as leave or home travel concession.
For instance, Relicare Ltd. has offered a travel package to its employees for personal holidays in Goa. In this case, Relicare Ltd. cannot claim ITC on GST paid by them for the holiday package. This is so because ITC on travel is allowed only for business purposes.
Also Read: Know GST Rates on Textile and Garments
On the other hand, Toto Ltd. has offered a travel package for 2 days to its employees to attend the company’s seminar at Udaipur. In this case, Toto Ltd. can claim ITC on GST paid for the travel package. And, this is so because the GST on the package is payable for business purposes i.e., the company’s seminar.
Flow of Input Tax Credit in various cases
Air
| Particulars | GST Rate |
|---|---|
| Economy Class air tickets | 5% |
| Business Class air tickets | 12% |
| Chartered flights tickets for the purpose of pilgrimage | 5% |
| Rental services of aircraft (with or without operator)/chartered flights | 18% |
Train
| Particulars | GST Rate |
|---|---|
| AC and First Class train tickets | 18% |
| Sleeper and General Class train tickets | 0% |
| Metro train token/card | 0% |
Road
| Particulars | GST Rate |
|---|---|
| Traveling by public transport | 0% |
| Traveling by metered taxi/auto rickshaw/e-rickshaw | 0% |
| Traveling by non AC/contract carriage/stagecoach | 0% |
| Traveling by radio taxi and other similar services | 5% |
| Traveling by rented road vehicles – cars, buses, coaches (with or without operator) | 18% |
Sea
| Particulars | GST Rate |
| Travel via inland waterways | Exempted |
| Travel by vessel used for public transport | Exempted |
| Travel by vessel used for tourism | 5% |
Situations whether ITC on Travel is Applicable or not?
Following are the cases which illustrate the flow of Input Tax Credit in various cases:
1. Where the travel tickets booking is via an online travel agent:
In this case, the business entity will need to book two invoices separately. First with, Airline/Railway Department or any other Transport Department and second with Online Travel Agent.
Firstly, the invoice will be from the Transport Department which is actually going to provide the travel service. The department will issue a separate tax invoice including the amount of GST applicable on the ticket fare in the name of the business entity. Through this invoice, the business can take the credit of GST paid on travel tickets.
Secondly, the invoice will be from the travel agent. The online travel portal will charge a “Convenience Fee and other booking charges” in addition, GST to the cost of travel ticket and will raise the invoice. Accordingly, GST input tax credit will flow from both the places i.e. from Transport Department and Online Travel Agent/Portal.
2. In case the tickets have been booked via an offline travel portal:
This case is same as the online travel agents mentioned in point 1 above. The offline travel agent will raise a reimbursement cum tax invoice for the reimbursement of travel ticket amount pay by him and his ticket booking charges including GST.
In this scenario also, GST input tax credit will flow from both places. That is to say from the Transport Department as well as Offline Travel Agent.
3. Where the tickets have been booked directly from the website of Transport Department:
In this case, GST credit in respect of GST charged by the Transport Department would be available to businesses via GST invoice or e-ticket issued by the Department.
Important Points
If you are traveling for the purpose of your business and you have a GST Number, then you can avail the Input Tax Credit on the GST paid.
While purchasing the tickets, you must correctly mention your GSTIN. This is so, because the seller will upload the invoice in his GSTR-1 with your GSTIN. This invoice will then reflect in his GSTR-2B form. Accordingly, after this, you can claim ITC in GSTR-3B form depending on the invoice details provided, as visible in his GSTR-2B.
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