QUESTION

Mr A is engaged in the business of tour and travel agent. Under GST Law, Air Travel Agents has two options to discharge its GST liability: Commission module- Tax is payable on commission as per Section 15 Basic Fare module- Tax is payable on Basic Fare module as per Rule 32(3) of CGST Rules, 2017. Presently Mr A is following the Basic fare module for all the transactions and paying GST @ 5%/10% on Basic fare as the case may be. Also, he gets income in the form of service charges i.e., booking fees from customers for whom he has booked tickets and paying GST @ 18% on these service charges. Now he wants to charge GST on transactions-to-transaction basis i.e., to charge GST as per Basic fare module on some transactions and to charge GST as per commission module on some transactions.
Query:
1. Can he switch to commission module from basic fare module in between the year?
2. Can he follow both modules on a transaction-to-transaction basis during the whole year?
3. If he goes for commission module and sometimes doesn`t get any commission from Airlines. Does he require to pay GST as per base fare? If he follows transaction-to-transaction basis and sometimes doesn`t get any commission from Airlines. Does he require to pay GST as per base fare?
4. If he follows Basic fare module, does he require to pay GST @ 18% on service charges i.e., Booking fee received from customer?

ANSWER

Facts of the case: Mr A is engaged in the business of tour and travel agent. Also, he gets income in the form of service charges i.e., booking fees from customers for whom he has booked tickets and paying GST @ 18% on these service charges. Under GST Law, Air Travel Agents has two options to discharge its GST liability: Commission module and Basic Fare module.
Query:
1. Can he switch to commission module from basic fare module in between the year?
2. Can he follow both modules on a transaction-to-transaction basis during the whole year?
3. If he goes for commission module and sometimes doesn`t get any commission from Airlines. Does he require to pay GST as per base fare? If he follows transaction-to-transaction basis and sometimes doesn`t get any commission from Airlines. Does he require to pay GST as per base fare?
4. Suppose if he follows Basic fare module, does he require to pay GST @ 18% on service charges i.e., Booking fee received from customer?

Law Applicable: CGST RULE 32

RULE 32. Determination of value in respect of certain supplies (corresponding section 15)

(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter.

(3) The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated at the rate of five per cent. of the basic fare in the case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international bookings of passage for travel by air.

Explanation.- For the purposes of this sub-rule, the expression 'basic fare' means that part of the airfare on which commission is normally paid to the air travel agent by the airlines.

Reply: As per sub rule (1) of Rule 32, it is option of the supplier to choose for valuation of supply under Rule 32. Further, the rule does not put any restriction on availing of option one time in a particular period like in the case of composition levy, therefore the option can be availed number of times in a year. The supplier can also take option on transaction to transaction basis

Booking amount received from the customer is not taxable because tax is charged either on commission or on the value determined as per Rule 32.

But if the customer gives advance and doesn't respond thereafter and the amount of advance is forfeited then it will be a different transaction and will be taxed.  (Reply dt. 06/07/2021)