Can you claim Input Tax Credit on Travel

Can You Claim Input Tax Credit on Travel?

Input Tax Credit or ITC is claiming the credit of GST paid on purchase of goods or services (like travel), which are used for the furtherance of business.

What are the significant modes for traveling in India?

In India, there are three significant modes for travelling – air, rail and road

Air:
If the passenger wants to reach its destination faster and in less time, then obviously he will choose to go by air. However, this mode of travel comes at an additional cost like security fees, handling charges, duty cost, higher GST rate, etc., which make its 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 mode of travel. It is so because 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.

GST Rates applicable for Travel

Travel by Air

Particulars

GST Rate

Economy class air tickets

5%

Tickets of chartered flights for the purpose of a pilgrimage visit

5%

Business class air tickets

12%

Rental services of aircraft and chartered flights with or without operator

18%

Travel by Train

Particulars

GST Rate

AC and First-Class train tickets

18%

Sleeper and general class tickets

0%

Metro train tickets

0%

Travel by Road

Particulars

GST Rate

Passengers travelling through public transport

0%

Transport by road of passengers through metered taxi/auto rikshaw or e-rikshaw

0%

Transport by Non-AC contract carriage or stagecoach

0%

Transport by air-conditioned contract carriage or stagecoach

5%

Transport by radio taxi and similar transportation services

5%

Rental services of road transportation including cars, buses, coaches

18%

Can you claim Input Tax Credit on Travel?

Input Tax Credit can be used only in case, it is used for furtherance of business. In simple words, ITC on travel can be claimed only if the same has been used for the business purpose. No ITC can be claimed in case the travel is meant for personal purposes.

Further, ITC is also not available in case of travel, 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 at Goa. In this case, Relicare Ltd. cannot claim ITC on GST paid by them for the holiday package. 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 company’s seminar at Udaipur. In this case, Toto Ltd. can claim ITC on GST paid for the travel package. This is so because the GST on package has been paid for the business purposes i.e., company’s seminar.

Flow of Input Tax Credit in various cases

Following are the cases which illustrates the flow of Input Tax Credit in various cases:
1. Where the travel tickets have been booked via an online travel agent:
In this case, the business entity will be needed to book two invoice separately – Airline/Railway Department or any other Transport Department and Online Travel Agent.

First, will be of the Transport Department who is actually going to provide the traveling 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, business can take the credit of GST paid on travel ticket.

Second invoice will be of the travel agent. The online travel portal will charge “Convenience Fee and other booking charge” plus GST in addition to the cost of travel ticket and will raise the invoice. GST input tax credit will flow from both the places i.e. from Transport Department and Online Travel Agent/Portal.

2. Where 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 paid by him and his ticket booking charges including GST.

In this scenario also, GST input tax credit will flow from both the places i.e. from Transport Department and 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 Transport Department would be available to business via GST invoice or e-ticket issued by the Department.

Important Points

If you are travelling 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 the seller will upload the invoice in his GSTR-1 with your GSTIN. This invoice will then reflected in his GSTR-2B form. After this, you can claim ITC in GSTR-3B  form based on the invoice details provided by the seller, as visible in his GSTR-2B.

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