QUESTION

Client is from traveling and tourism and Travel industry . This Industry has different segments of Revenue and expenses. We have Querry in one of the segment. ie Hotel Bookings. Hotel Bookings : A. Income from Purchase of Hotel Rooms and then sale of Hotel Rooms Example : Let Client Purchase Hotel from Trident Hotel @ 9,000 per night and pay ITC of 18% on Rs 9000 ie Rs 1620. Total Rs 10,620. Client, sell Trident Hotel for Rs 10,000 per night and charge 5% GST ie Rs 500 and total comes to Rs 10,500. Client are charging GST @5 % because of package tour as their price includes sight seeing nominal part also. Question : Whether GST @ 5% is proper ? and what additional disclosures are required for the same on invoice ? Question : Whether client can claim ITC of Rs 1620 on this sale ? and If NO, then whether they can utilize the same against other stream of income ? or Do I need to compulsory reverse the same in books and consider this ITC of 1620 as my cost of client only. Question :- For commission received for Outdoor Booking in foreign currency is Export of service, so its Tax free as Place of supply is outside India ? Now sometimes as against commission balance credit with foreign hotelier, utilize towards other client booking and they pass JV for adjustments in my clients ledger (also other client pay in india in INR), so they don’t remit the fund, whether this amount to violation of export of services and department can charge the said Export commission as Taxable income ? EG:- Hotel A in dubai remitting commission for booking through client (here end customer books directly through client) is tax free for client as export of services. However if A hotel adjust client commission in next booking and client collects from end customers and keep with them then whether it amounts to violation of Export of services ??

ANSWER

Facts of the case:
Travel Agent books hotel room from Trident Hotel @ 9,000 per night and pays GST of 18% on Rs 9000 i.e. Rs 1620. Total Rs 10,620. The agent then sells this room for Rs 10,000 per night and charges 5% GST i.e Rs 500. Total Rs 10,500.

Law Applicable :

Notification 11/2017 CGST Rate specifies the rate of tax on tour operator services as follows ;

Interpretation :
As per notification 11/2017, The rate of tax of tour operating services can be opted at the rate of 5% only on the condition that ITC on inputs and input services is not availed.

Conclusion :
So, to answer your questions;

Question 1
: Whether GST @ 5% is proper ? and what additional disclosures are required for the same on invoice ?

Answer:
Yes the rate of tax 5% is proper. Invoice should be made as per rule 46 CGST Rules with mentioning the HSN code and description of services rendered. 
reverse the same in books and consider this ITC of 1620 as my cost of client only.

Question 2:
 : Whether client can claim ITC of Rs 1620 on this sale ? and If NO, then whether they can utilize the same against other stream of income ? or Do I need to compulsory reverse the same in books and consider this ITC of 1620 as my cost of client only.

Answer:
The condition as per notification 11/2017 for opting the rate of 5% is that the ITC should not be availed. Since this ITC relates to input services which are specifically used in provision of the service on which ITC is restricted, therefore ITC can not be availed against other streams of income. ITC of 1620 must be reversed. 

Facts of the case:
Commission is received for Outdoor Booking in foreign currency. To check whether this is an export of service if forex is not received but adjust through a journal entry.

Law Applicable:
1. Section 2(6) of IGST defines Export of service as follows;

"(6) 'export of services' means the supply of any service when,''
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; 1[or in Indian rupees wherever permitted by the Reserve Bank of India] and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8"

2. If both the supplier and recipient of service in in India then the place of supply is dictated by section 12(3) as under;
"   (a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or

   (b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or

   (c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or

   (d) any services ancillary to the services referred to in clauses (a), (b) and (c),

shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient."

3. If however the receiver of service is outside India then POS is decided as per section 13(8);

"(8) The place of supply of the following services shall be the location of the supplier of services, namely:''

   (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

   (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month."

Interpretation:
To be classified as an export of service under section 2(6) of IGST, it is essential that Place of Supply be outside India otherwise the condition laid under clause (iii) of section 2(6) is violated.
However in the case of tour operator services, Place of supply under 12(3) read with first proviso and 13(8)(b) is always inside India. Since the place of supply is in India therefore this is not an export of service.

Conclusion:
This is not an export of service, on the grounds that the place of supply is not outside India. (Reply dt. 16/12/2021)