The recent GST reforms announced at the 56th GST Council meeting are set to reshape India’s travel and tourism industry, placing travel agents at the intersection of new opportunities and emerging challenges.

For hotel accommodation priced up to ₹7,500 per day, the GST rate has been reduced from 12% with input tax credit (ITC) to 5% without ITC. While this makes travel more affordable for consumers, travel agents lose ITC benefits, potentially compressing margins.

In non-economy class air travel, the GST rate has increased from 12% with ITC to 18% with ITC. This change raises fares for business travelers but ensures agencies serving corporate clients can still claim full ITC, aiding cash flow management.

One of the most significant developments is the amendment of Section 13(8)(b) of the IGST Act, which now allows services provided by travel agents and tour operators to foreign clients to qualify as exports. This recognition enables agencies to avail zero-rated benefits under GST, including refunds of input tax credit, while also strengthening their global competitiveness.

The motor vehicle transport sector has also seen changes. The GST rate remains at 5% without ITC, but for those opting for full ITC, it has risen from 12% to 18%, requiring agencies to evaluate their business models carefully.

Commenting on the reforms, Jyoti Mayal, chairperson of the Tourism and Hospitality Skill Council, said,“The latest GST reforms bring both relief and responsibility for travel agents. On one hand, reduced hotel tariffs will stimulate demand in the domestic tourism segment. On the other, the removal of ITC in this category will require agents to realign their pricing strategies. Most importantly, the recognition of intermediary services as exports is a game-changer, unlocking opportunities for Indian travel businesses to expand their global footprint while enjoying the benefits of zero-rated taxation. Luxury travel is as important and needs to be promoted more, as the returns are higher, spends are higher, and it is exclusive. India needs to focus on inbound luxury tourism to stay competitive with neighbouring countries”.

As the sector adapts, the focus will be on balancing affordability with sustainable business models, ensuring Indian travel agents remain competitive in both domestic and international markets.