The Finance Ministry has said that since cancellation is related to services, the cancellation charge will now attract GST.
- Hotel, train booking cancellations will now attract GST
- As per the Ministry, cancellation charge is a payment instead of a breach of contract
- The circular was issued by the Finance Ministry on August 3.
The cancellation of confirmed train tickets would now be costlier as it would attract Goods and Services Tax (GST), according to a circular issued by the Ministry of Finance on August 3. 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.
Also Read : Now, generate Direct UAN via EPFO portal –Check step by step online process
“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.
If one cancels the bookings of a particular class, then the same GST rate applicable for booking seats and berths for that class will be applied. For instance, the rate is 5 per cent for first-class or AC coaches and the cancellation fee for this category is Rs 240, then the total cancellation free will be Rs 252. No GST is applicable on other categories and second sleeper class.
Also Read : Punjab National Bank: Accounts will freeze after 31 August if customers fail to do THIS
Indian Railways charges Rs 240 for cancellation when the ticket is cancelled 48 hours or more before the scheduled departure of the train. If the confirmed ticket is cancelled before 48 hours to 12 hours from the scheduled departure of the train, 25 per cent of the ticket amount is charged as a cancellation fee.
