New Delhi, Aug 29: The cancellation of confirmed train and air tickets would now be costlier as it would attract Goods and Services Tax (GST), according to a circular issued by the Ministry of Finance. As per the circular issued by the Finance Ministry’s Tax Research Unit, booking of tickets is a ‘contract’, under which the service provider (IRCTC/Indian Railways) promises to provide services to the customer.
As per the notification, the cancellation charged for a first class or AC coach ticket would attract 5 per cent GST, which is the rate levied on the ticket. The same logic would be applicable to cancellation of air travel or hotel accommodation, where the cancellation charges would be taxed at the same GST rate as applicable to the principal service.
According to the Ministry, the cancellation charge is a payment instead of a breach of contract, so GST has to be paid. Cancellation of a ticket in any such situation would now attract GST at 5 per cent on the cancellation charges.
“When the contract is breached by the passenger, the service provider is compensated with a small amount, collected as a cancellation charge. Since the cancellation charge is a payment, and not breach of contract, it will attract GST,” the notification read.
For example, cancellation charges of railway tickets for a class would attract GST at the same rate as applicable to the class of travel (i.e. 5% GST on first class or air-conditioned coach ticket and nil for other classes such as second sleeper class). Same is the case for air travel.
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