No GST on cancellation of SOTO tickets
Pawan S Jain, Managing Director, Belair Travel & Cargo, shares how on their insistence and two-and-a-half years of continued efforts the GST Council has come out with a ruling to remove 18% GST on refunds and ancillary services on Sold Outside Ticketed Outside (SOTO) tickets.
The GST Council, under Government of India, has removed the 18 per cent GST on refunds and ancillary services on SOTO (Sold Outside, Ticketed Outside) tickets, which are between two points outside India. Pawan S Jain, Managing Director, Belair Travel & Cargo, says, "The change came in after an advance ruling was filed by us to the GST Department, which came in two and a half years after, as it could not be earlier resolved and GST council did not meet due to COVID. Now after our long deliberations with the airlines and clarifications to the GST Dept, they have finally agreed and confirmed with a notification.”
He explained that while some airlines did not charge this GST, some others were charging GST on all booking classes. “All airlines didn’t want to understand the regulations, while some airlines accepted it two years ago before COVID struck. The law must be uniform for everybody. We had around 700,000 tickets for refund, which incurred a
huge amount, because the difference between 0 per cent GST and 18 per cent GST was about ` 2,000-20,000 on a business class ticket,” he said.
Explaining further, he shared, “The GST rules have always been clear cut since 2017, which means that if the GST on primary booking class was zero, the ancillary services will also have zero charge of GST. Thus, all the other services, including excess baggage, cancellation charges, refund amounts will also have zero tax and not 18 per cent. All airlines didn’t accept it and insisted on charging. In fact, even on SOTO tickets there is no charge applicable because the services are utilised outside India and hence Indian GST doesn’t apply. However, airlines insisted on charging, which was wrong.”
Thus, they applied to the GST department through our lawyers, and the GST Council Clarified this advance ruling with Circular No. 178/10/2022-GST CBIC190354/176/2022-TRU Dated 3rd August 2022. The GST Council confirmed that GST (K3) @18 per cent as cancellation charges, RAF charges or rebooking charges, are not applicable on airlines SOTO tickets and are treated as bundled services, with the rate of tax as the original ticket such as refunds and other ancillary services. Similar concession has been provided to railway booking, business class tickets, and transparency on economy class tickets regarding GST applicable. “The removal of GST on SOTO tickets and on refunds will enhance substantial foreign exchange earnings for India for issuing tickets without GST tax,” says Jain. The ruling specifies composite services, which Jain says, includes all services right form booking till exiting the airport. “On all composite services the tax would remain as original ticket. If a class of tickets, will not have tax, then the other related
The change came in after an advance ruling by us to the GST Department, which came in two and a half years after
services on the ticket will also have no tax. Hence, this 18% GST should be refunded to the agents,” he adds.
The same goes for hotel bookings as hotels are charging 18 per cent GST on cancellation. “If a ` 250 hotel room will not have GST, then the cancellation will also not have GST,” he points out.