The cancellation fee would now be subject to GST, according to the Finance Ministry, because cancellation is tied to services.
According to a circular released by the Ministry of Finance on August 3, the cancellation of confirmed train tickets would now be more expensive since it would be subject to Goods and Services Tax (GST). Booking tickets is considered to be a “contract” under which the service provider (IRCTC/Indian Railways) agrees to offer services to the consumer, according to a circular released by the Finance Ministry’s Tax Research Unit.
Details on GST on confirmed train and hotel booking cancellations:
According to the notification, a first-class or AC coach ticket cancellation fee will be subject to 5% GST, which is the rate assessed on the ticket. The same reasoning would apply if you had to cancel your hotel or flight reservations, in which case the cancellation fees would be subject to the same GST rate as the primary service.
The Ministry contends that the cancellation fee is a payment rather than a breach of the contract, necessitating payment of GST. Any such cancellation of a ticket would now be subject to a GST of 5% on the cancellation fees.
“When a passenger violates the terms of the agreement, the service provider is made whole by a little sum that is taken in the form of a cancellation fee. The cancellation fee will be subject to GST because it is a payment and not a breach of the contract “the message was read.
For instance, cancellation fees for a certain class of train tickets would be subject to the same amount of GST as the relevant travel class (i.e., 5% GST on first-class or air-conditioned coach tickets and nil for other classes, such as second sleeper class). The same is true of plane travel.
When a ticket is canceled 48 hours or more before to the train’s scheduled departure, Indian Railways charges Rs 240. 25% of the ticket price is levied as a cancellation fee if the confirmed ticket is canceled between 48 to 12 hours of the train’s scheduled departure.