GST to be levied on cancellation of confirmed train ticket: Finance Ministry

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, the 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 charge for a first-class or AC coach ticket would attract 5 percent 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 percent on the cancellation charges.

"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 a 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 tickets and nil for other classes such as second sleeper class). The 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, if the rate is 5 percent for first-class or AC coaches and the cancellation fee for this category is Rs 240, then the total cancellation fee will be Rs 252. No GST is applicable on other categories and second sleeper classes.

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 percent of the ticket amount is charged as a cancellation fee.