Have you booked any hotel room, train ticket or entertainment show recently and now planning to cancel it and get the refund? Here’s a news for you. Finance ministry has said that since cancellation is related to services, cancellation charge will now attract GST. Finance Ministry’s Tax Research Unit has released 3 circulars explaining many rules, one of them is related to the cancellation charges and GST.
One of these 3 circulars explains payments levied on breach of contract including cancellation of bookings in hotels, entertainment shows and train tickets. Booking is considered a contract in which the service provider promises to offer a service. When a customer breaches the contract or cancels the booking then the service provider earns a certain amount in the form of cancellation charge. Since cancellation charge is a payment in lieu of the breach of contract, it will have GST imposed on it.
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GST calculation on cancellation charges
As mentioned, there will be GST on ticket cancellation. For example, if you book a ticket for entertainment event and its cancellation charges in Rs 100, the GST will be imposed on the income of Rs 100 to the service provider. The move is set to make unplanned travelling costlier and one has to be sure before booking hotels or train tickets now.
GST on room rent of ‘sarais’ managed by religious charitable trust?
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that GST will not be applicable on room rent charged by ‘sarais’ or inns managed by religious and charitable organisations. CBIC clarified this after confusion over GST on room rents. In the month of June, GST council had decided that there will be 12 per cet GST on all hotel room bookings which cost below Rs 1000 per day.
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GST on Garba?
There are also unconfirmed reports that GST will be imposed on the entry fee on Garba events. Entry tickets of commercial events priced above Rs 500 per head attracts GST. Event orgnisers in many parts of India are demanding the withdrawal of this 18% GST on Garba Entry Fee.