Everything About GST on Flight Tickets and Input Tax Credit

The Goods and Services Tax in India has reformed the tax system by introducing a single tax that is levied on both goods and services. As per the GST law, all services that are rendered for the benefit of a company or enterprise are eligible for taxation. As such, GST on flight tickets used for business travel has become the norm. In this article, we try to understand GST guidelines on air travel as well as how to avail GST input on flight tickets in detail:

 

Before the introduction of GST on July 1st, 2017, there were multiple taxes levied on goods and services. The numerous states in the country and their differing tax laws made the tax system in India extremely complicated, creating a need for a unified taxation structure.

 

In India, Good and Services Tax (GST) was applied to flight tickets from July 2017 onwards. All domestic airlines charge GST on flight tickets. GST is levied on flight tickets at the point of sale. What it means is that on the basis of the departure city of the traveller, the same state GSTN will be charged. Let us dwell deeper into this and understand the changes introduced in the year 2022 with respect to airfare for business travellers:

Here are some of the prominent things to note with regard to GST on flights:

• GST (K3) rate on airline tickets booked from January 1st, 2022 to February 1st, 2022 = 10%
• GST rate on airline tickets booked after February 1st, 2022 = 5%

It is, therefore, imperative to check the GST on airfares before buying air tickets, especially if travel date changes are foreseen.

• Landing charges have also increased by 7%
• Development Tax will be levied at Magam airport (Jammu and Kashmir) and Leh airport. This tax will be 10% of the cost of the air tickets.
• Travel within the Indian territory will be taxable for air travel above 800 kilometres in first and second-class seats. This tax is equivalent to the IAT or Indian Airfare Tax and is calculated to be INR 10,000.

 

GST on flight tickets applies to various travel services for corporate purposes. Here’s how it works across different types of flights:

Domestic Flights:

• GST on domestic flight tickets is applicable.
• Businesses can claim ITC on economy and business class tickets if these flights are used for business purposes.
• GST on airline tickets for corporate travellers as of July 18th, 2022 are as follows:

 

Flight Type	Flight Class	GST Rate on Flight Tickets
Domestic	Business	12%
Domestic	Economy	5%
International	Business	12%
International	Economy	5%

  

• Economy class flight tickets to and from Bagdogra (West Bengal) and the North-eastern states of India, namely, Assam, Sikkim, Tripura, Arunachal Pradesh, Manipur, Mizoram, Meghalaya, as well as Nagaland, are exempted from GST, as per the GST guidelines in effect from July 18th, 2022.
• GST on air ticket booking is imposed in addition to other charges, namely airport charges. These domestic air ticket GST rates are levied by the Airport Authority of India (AAI).

 

International Flights: 

• Most international flights from India are GST-exempt, but the domestic portion of the journey (such as a connecting flight within India) may still incur GST, which businesses can claim as input credit.
• Companies can also claim GST on international flight tickets when they avail supplementary travel services, such as airport transfers, lounge access, and baggage services, provided these expenses are billed separately and show the GST details.

 

Earlier, service tax was imposed on everything, including air ticket bookings. The economy class tickets were levied with a payable tax rate of 5.6% under the previous tax regime. On the contrary, a tax rate of 8.4% was accrued on business class tickets under the previous VAT system. However, under the new tax system, GST on domestic flights and international flights was fixed at 5% to make air travel a little more budget-friendly for the people of our country. Let us have a look at the breakdown of taxes imposed and GST on travel for both economy and business class tickets:

 

Availing ITC for GST on Domestic Flights in India

Under the Goods and Services Tax regime, firms are eligible to get GST Input on air tickets. This stands true for air travel expenditure that is incurred when employees travel for official reasons, i.e., business purposes. However, the Input Tax Credit can be only availed for the official air travel of staff and not for the personal use of employees. Here are the key aspects of flights GST (K3) that should be kept in mind:

• While booking the flight ticket, if a traveller gives the GST number of its business entity, then the traveller can avail of the Input tax credit on the GST Tax amount of their respective flight ticket. 
• For this, they would need the flight GST Invoice, which is provided by the Airline.
• This GST input on flight tickets can help travellers reduce their travel expenses by 5-12% (depending on the class of ticket purchased).
• On the basis of the traveller’s company, GST registration state, and the Airline GST registration state, either CGST or SGST is charged. Furthermore, IGST is charged as the GST tax amount. Let’s understand this with the following example- Suppose Traveller A, whose Business entity XYZ has the GST registration in the state of Maharashtra, wants to book a flight from Mumbai to Delhi. In this case, as A’s business entity is registered in the same state as the departure state of A, hence CGST or SGST will be charged as GST Tax amount.

 

Similarly, if Traveller A’s business entity is registered in the state of Karnataka, but the traveller is booking a flight ticket from Mumbai to Delhi, then, as the two states differ, hence IGST will be charged in this case of GST on flight tickets.

 

Step-by-step process for claiming ITC on flights for businesses:

1. Obtain a GST-Compliant Invoice: Ensure the airline issues a tax invoice stating how much GST on flight tickets is charged.
2. Match the Invoice with GSTR-2 Returns: Verify that the invoice issued by the airline is reflected in your GSTR-2 form (now GSTR-3B). This ensures that the GST claim matches what is reported by the airline.
3. Filing the GST Return: Include the flight ticket in your regular GST returns, clearly indicating the amount of input credit claimed for the period.
4. Documentation: Retain all travel documents and ensure that the flight’s purpose is clearly for business. This step is crucial, especially if your ITC claim is reviewed during a tax audit.

By following these steps, businesses can ensure that they maximise their GST claims and reduce overall travel expenses.

When flights are cancelled, businesses may wonder if they can still claim GST on purchased tickets. The answer largely depends on how the airline processes the cancellation and whether a refund is issued. Here’s what you need to know:

1. Refunds with GST Reversal:
   If a business receives a full refund for a cancelled flight, including the GST component, they cannot claim ITC on the cancelled ticket. The airline will typically reverse the GST charged when refunding, meaning no tax is applicable.
2. Partial Refunds or Non-Refundable Tickets:
   For non-refundable tickets or tickets where a partial refund is applicable, businesses can claim the GST on the amount not refunded. However, they must ensure the cancellation terms are clearly stated, and the invoice reflects the updated details.
3. Documentation for Cancelled Flights:
   To claim ITC on non-refundable GST, businesses should retain all relevant documentation, including the original GST-compliant invoice and any communication regarding the cancellation and refund. This is essential in case tax authorities audit the claim.
4. Impact on Filing GST Returns:
   Businesses should regularly reconcile their records to account for cancelled flights and adjust their GST returns accordingly. If the GST has been reversed as part of a refund, this should be reflected in the company’s GSTR-2 (now GSTR-3B) form to avoid discrepancies.

GST can only be claimed on cancelled flights if the refund does not cover the GST component. Proper documentation and adjustments in tax filings are essential to avoid issues with tax authorities.

Claiming GST on flight tickets can significantly reduce travel costs for businesses, but it’s essential to avoid some common errors that may lead to rejected claims or penalties during audits. These include:

1. Incorrect or Incomplete Invoices: To successfully claim GST, the airline's invoice must be GST-compliant and include all the details mentioned above. 
2. Claiming GST on Personal Travel: Businesses can only claim GST on flights taken for business purposes. Trying to claim GST on personal travel or combining business and personal travel without proper segregation can result in penalties. 
3. Failure to Reconcile Invoices with GSTR-2: One common oversight is not reconciling the airline's invoices with the GSTR-2 (now GSTR-3B) form. Discrepancies between the invoices issued and what is reflected in the now GSTR-3B returns can delay or invalidate your claim. Regularly checking and reconciling records ensures your claims are accurate.

Under the GST law, any company can be eligible for availing of ITC as long as taxes are paid in the procurement of goods and services that are used to expand the business, unless specifically prohibited. Let us understand GST on air tickets input credit with an example-

 

The employees of a company that is situated in Delhi travel to Mumbai to buy raw materials. In this case, the air travel expenditure that is incurred for the travelling purpose of the employees between Delhi and Mumbai is for business purposes rather than for personal use. The company will therefore be eligible for availing the GST ITC on air tickets. However, this is subject to having the receipt of a valid tax invoice that contains the prescribed particulars stated under the law.

 

Wondering how to get airline GST invoice? Well, it is quite simple! The invoices raised by the air carrier or travel agent must have the following particulars-

• Registered GST name of the company
• Registration GST number of the company
• Registration GST address of the company
• Registration GST contact number of the company
• Registration GST email address of the company

 

Since GST on air tickets in India is mandatorily charged, all Domestic Airlines like Indigo, SpiceJet, Air-Asia, Vistara, Go-First etc., provide GST (K3) invoices either immediately after booking the air ticket or immediately after the travel is completed. 

 

myBiz by MakeMyTrip is a leading online travel platform for all kinds of corporate travellers. myBiz caters to more than 60,000 corporates across all sizes, be it large corporates, mid-size corporates or SMEs and MSMEs. 

 

Apart from offering attractive special corporate flight fares and 24*7 travel expert support, myBiz also guarantees GST invoices to all their corporate customers who provide their business entity’s GST number while booking flight tickets on the myBiz platform. Corporate customers can download all their flight GST invoices from the myBiz platform in just few clicks. With these invoices, corporates can easily claim GST input on flights tickets which helps them in reducing their travel expenses by almost 5% (considering the economy class flight tickets). So, signup with myBiz to make the most of travel tax benefits. Join now!

Q1. What is the flight GST rate applicable to air tickets?

Ans. As of July 1st, 2017, GST has replaced Service Tax, Swachh Bharat Cess, and Krishi Kalyan Cess. Hence, travellers flying in Business and Premium Economy class tickets will have to pay 12%, while travellers flying in Economy will bear a 5% GST rate.

Q2. Is it mandatory to provide registration details for GST on air ticket booking?

Ans. No, it is not mandatory to provide GST (K3) registration details at the time of flight bookings. It is optional to provide the GST details of the registered company and can be filled in if the customer wants to avail of the Input Tax Credit on the GST paid and if the travel is for official purposes.

Q3. Can the Input Tax Credit be claimed if the tickets are booked through an online travel management tool?

Ans. Yes, the ITC can be claimed if one books their tickets through an online travel management tool like myBiz, thanks to their assured GST invoices.

Q4. Where do customers provide the GST registration details?

Ans. If the customers buy air tickets directly through the myBiz portal, the GST registration details will be auto-filled once they have signed- up. On the other hand, they can also fill in their company’s GST details on the confirmation page while booking tickets. Simply follow the instructions and add ‘GST number for Business Travel’ for guaranteed invoices.

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