Now GST on Cancellation of Confirmed Train Tickets, Hotel Reservations | Details

Canceling confirmed train tickets would now be more costly as it would incur goods and services tax (GST), according to a circular issued by the Ministry of Finance on August 3. According to the circular issued by the Tax Research Unit of the Ministry of Finance, ticket booking is a “contract”, whereby the service provider (IRCTC/Indian Railways) undertakes to provide services to the customer.

According to the notification, cancellation charged for a first class or AC coach ticket would incur 5% GST, which is the rate levied on the ticket. The same logic would apply to the cancellation of air travel or hotel accommodation, where cancellation charges would be taxed at the same rate of GST as that applicable to the primary service.

According to the department, cancellation charges are a payment rather than a breach of contract, so GST must be paid. Canceling a ticket in such a situation would now incur 5% GST on the cancellation fee.

“When the contract is breached by the passenger, the service provider is compensated with a small amount, collected as a cancellation fee. Since the cancellation fee is a payment, not a breach of contract, it will incur GST,” the notification reads.

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For example, train ticket cancellation charges for one class would incur GST at the same rate applicable to the class of travel (i.e. 5% GST on first class or bus tickets air-conditioned and zero for other classes such as second class couchette). The same is true for air travel.

If reservations for a particular class are cancelled, the same GST rate applicable to the reservation of seats and sleepers for that class will be applied. For example, the rate is 5% for first class or AC coaches and the cancellation charge for this category is 240 rupees, then the total free cancellation will be 252 rupees. No GST is applicable on other categories and second class sleeper.

Indian Railways charges Rs 240 for cancellation when the ticket is canceled 48 hours or more before the scheduled departure of the train. If the confirmed ticket is canceled before 48 hours to 12 hours from the scheduled departure of the train, 25% of the ticket amount is charged as a cancellation fee.

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