Understanding GST Exemptions for Tour Operators Catering to Foreign Tourists

Introduction

Tour operators offering package tours that encompass destinations both within India and in neighboring countries—such as Nepal, Bhutan, or Sri Lanka—may be eligible for exemptions from Goods and Services Tax (GST).

Eligibility for GST Benefits

To qualify for GST exemptions, tour operators must meet the following criteria:

1. The tour must cover both Indian and foreign locations.
2. The customer must be classified as a foreign tourist.

Definition of a Foreign Tourist

As per GST regulations, a foreign tourist is defined as:

“A person who is not normally resident in India and visits India for a brief stay of no more than 6 months for tourism or other legal non-work purposes.”

For example, an individual who is not classified as a foreign tourist is someone residing in India for an extended period. In contrast, a tourist from Canada visiting for 10 days qualifies for the exemption.

Exempt Portion of the Tour

The GST exemption only applies to the segment of the tour that takes place outside India.

Important Note: The exemption is limited by the following criteria:

1. The proportion of days spent outside India, or
2. 50% of the total tour cost.

**If the days spent outside India exceed 50% of the total tour duration, no exemption will be granted; GST will be applied to the entire package.

Counting Days During the Tour

GST regulations provide clear guidelines for counting days:

• A stay of 12 hours or more at a location is counted as one full day.
• A stay of less than 12 hours is counted as half a day.

This system ensures an accurate calculation of the duration spent in India versus abroad.

Steps to Calculate GST Exemption

Follow these straightforward steps:

1. Determine the ratio of days spent outside India relative to the total number of days of the tour.
2. Calculate 50% of the total tour cost.
3. Compare these two figures and select the smaller amount for your exemption.

Conclusion

The GST exemption represents a significant advantage for travel agents and tour operators serving foreign clients. To maximize this provision, ensure meticulous documentation, including passport copies, visas, itineraries, and invoices. Additionally, adhere closely to the 12-hour rule when tracking tour days to avoid calculation errors. Keep in mind that the maximum exemption is limited to 50%, regardless of how extensive the international travel portion of the tour may be.