We are confused by the fact that Tour Operator does not have ITC. You see, many of the travel agents buys holiday packages / tours from another firm who charges GST. If we again put 5% GST on purchase cost then it is cascading the tax when no ITC is available.
e.g. Agency 'A' supplies Tour Services to agency 'B' for Rs.50K+5% GST = 52500 total.
Now agency 'B' sells this to customer as Rs52500+ 5250 (Commission/Margin) = Rs.57750, Additionally as agency B is GST Registered, then he will add GST of 5%. So customer will pay Rs. 57750 + 2887.50 (5% GST) = Rs. 60637.50.
So cascading effect if no ITC and moreover customer will go to direct suppliers than agents. Ideally, agency B should pay GST for his commission earned i.e. Rs.262.50 (5% on 5250).
Is my understanding correct?
Please help asap as we are stuck with all bookings.
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