GST News: Are you planning a trip? We’ll take hotel and train bookings wisely, if you cancel you’ll have to pay tax – News Day Express | Gmx Pharm

New Delhi: Are you planning to travel? If yes, then think twice. The reason is that if you change your mind, it will hurt your pocket. In this case, the whole matter revolves around the Goods and Services Tax, i.e. GST. If you cancel after booking a hotel or train ticket, you actually have to pay taxes. The government has clarified the whole situation in this regard. Under Goods and Services Tax rules, this is like withdrawing from a deal. Therefore, a punishment is created in it. Taxes must be paid on this penalty. This means that cancellations of bookings made through hotels and tour operators assume responsibility for paying taxes (GST). The GST rate in effect at the time of booking will be applied to cancellation charges at the same rate.

The Treasury Department’s Tax Research Unit (TRU) has issued a circular on this. It explains different situations. These relate in particular to damages, compensation and penalties resulting from the violation of terms and conditions or other legal provisions. They have a direct impact on the common man. In it, ‘service’ was explained in a way. This is in the context of the GST laws. A contract for the provision of a service is concluded. It is therefore taxable. One of these circulars clarified that GST applies to cancellation fees in various situations.

Speaking to our partner Times of India, Chartered Accountant Sunil Gabhawala said: “The circular provides a good clarification of things. The example of the transport service was taken. It says that the transportation service starts with the booking of the ticket. This continues until the passenger reaches the destination. If an amount is deliberately paid at the time of booking and the passenger has the option to cancel the booking, the amount retained in the event of cancellation is itself “taken into account”. This way GST will be charged on this cancellation fee.

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The circular states that cancellation fees for First Class or AC bus tickets are 5% GST, which is the rate charged on the ticket. The same logic would apply to cases such as canceling air travel or hotel bookings. Here the cancellation fee is charged at the same GST rate as for the basic service. However, if the seller has received the deposit (deposit) from the potential buyer, e.g. B. Selling the property and the transaction does not go through, no GST is payable on the forfeited deposit. Forfeiture is compensation for loss. Tolerating breaches of contract is out of the question.
Gabhawala explains: “When the earnest money expires, it means that the delivery has not started yet. Therefore, the deposited amount is not taxed.

Payment instead of termination
Another situation was explained in the circular. This means that the employee leaves the job before the end of the notice period. If an employer waives the salary when the employee leaves before the end of the notice period or if the deposit is returned, this is out of the question. Harpreet Singh, Indirect Tax Partner, KPMG-India has an important point to make. According to him, in the case of Amneal Pharmaceuticals, the Gujarat Preliminary Ruling Board had determined that the recovery on reminder is covered by the GST. The circular states that it is not taxable. This can bring relief to many multinational companies who are stuck recovering due to non-payment of GST.

No GST on Inn
The government has also clarified the situation regarding GST in inns. It has been said that a section of media and social media is spreading the word that GST has also been introduced to inns run by religious/charitable foundations effective 18 July 2022. That is not true. However, based on the recommendations of the 47th GST Council, a GST exemption for hotel rooms up to Rs. 1000 was granted at the meeting. Now they are taxed at 12 percent. However, there is one more exception. Within the scope of this exemption, the rental of rooms in religious premises on behalf of a charitable or religious foundation is given. This applies to rooms with a rent below Rs.1,000. This exemption remains in force. The reports state that some inns will start paying GST from July 18, 2022. These inns include Guru Gobind Singh NRI Niwas, Baba Deep Singh Niwas and Mata Bhag Kaur Niwas. In this context, it is clarified that no notifications were issued to these restaurants. These inns have chosen to pay GST themselves.

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