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Industry Guide:

Travel Industry

 
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FREQUENTLY ASKED QUESTIONS 

General on Travel Industry 

1. Are the service fees charged for the sale of airline tickets issued by IATA (International Air Transport Association) accredited agents subject to GST? 

Service fees charged for the sale of air tickets is subject to GST at standard rate for inbound and zero rate for the outbound air tickets.

2. I am a travel agent who deals with supplies related to the travel industry. What is my taxable turnover?

A travel agent who makes taxable supplies in the travel industry is required to be registered. Hence, you are required to be a registered person if your annual taxable turnover exceeds RM500,000. Your taxable turnover would comprise of zero rated and standard rated supplies which includes: 

 (a) Where you act on behalf of a principal, your taxable turnover for providing agency services for a consideration in the form of a commission that you earn.

 (b) Where you act in your own name, your taxable turnover will be the commission that you earn as an agent and the value of other taxable supplies which you supply in  your name.

3. What are zero rated supplies in the travel industry in Malaysia?

Zero rated supplies in the travel industry are related to services consumed or enjoyed overseas, such as: 

 (a) International transportation including the arranging of international transportation of passengers and goods;
 
 (b) Services wholly performed overseas; and 

 (c) Services supplied to a person who do not belong in Malaysia and the person is not in Malaysia when the services are performed. It must also benefit a person outside of  Malaysia. 


Ticketing 

4. Are sales of domestic or international air tickets subject to GST?

The GST implication on the sale of air tickets for domestic or international flights are as follows:

 (a) Sale of domestic air tickets are subject to GST at standard rate;

 (b) Sale of International air tickets are subject to GST at zero rate and this will include International transportation of passengers;
 
      (i) from a place outside Malaysia to another place outside Malaysia (means from any place in the other country to the first entry point in Malaysia);

      (ii) from a place in Malaysia to a place outside Malaysia (means from the last exit point in Malaysia to any place in other country); or

      (iii) from a place outside Malaysia to a place in Malaysia.

 These GST treatments are applicable to all modes of transport (air, sea or road).  

5. Can my client (tourists) claim a refund of the GST amount he has paid as he did not utilize his non-refundable ticket after purchasing it?

 (a) GST will not be refunded to the client after they have purchased a nonrefundable ticket. A sale of ticket for passenger transport is the sale of a right to utilize that    particular transportation, such as the right to a seat on a plane, ship etc. Where the recipient of the supply (the intending passenger) does not take up the transportation for  whatever reason, his right to travel on the flight, ship, etc. has not been changed or taken away from him.

 (b) There has not been any adjustment on the event for GST purposes. The supplier is still liable to account for GST on the supply of the ticket.

6. What is the GST treatment on purchase of domestic flight tickets from an airline that cannot supply the transportation and there is no prospect that the tickets will be honored by the airline or any other airline?

In cases where the purchaser is an individual consumer:

 (a) Airline customers who have paid for domestic flights which are subsequently cancelled, can seek refund of the ticket price, from the relevant airline or credit card  supplier. The GST is inclusive in the final price charged by the airline for the supply of flight, and if the supply is not made, it is contractual matter between the airline and the  customer.

 (b) Any refund made to the customer will be inclusive of GST.  


Travel Agents Commission

7. As a travel agent, is my turnover based on my total ticket sales, or my commission? 

Annual turnover is based on the value of all taxable supplies you have made in relation to your business. As a travel agent selling on commission only, your taxable turnover will be based on the value of the commission received annually.

8. When an airline ticket is purchased by a travel agent using a customer’s credit card, the travel agent sends the credit card number to the airline. The airline then processes the credit card transaction for a payment. Can the travel agent issue a tax invoice or does the invoice need to be issued by the airline company?

In this scenario, the airline is selling the ticket directly to the passenger as the passenger pays the airline directly. Therefore, the airline is the principal and the airline should issue the tax invoice.

9. In this scenario, the airline is selling the ticket directly to the passenger as the passenger pays the airline directly. Therefore, the airline is the principal and the airline should issue the tax invoice.   

In this scenario, there are two separate sales transactions: the airline selling to the tour agent; and the tour agent selling to the passenger. The airline should issue a tax invoice to the tour agent for sale of air ticket to the tour agent. In turn, the tour agent is making a sale of air ticket (with a profit mark-up) to the passenger. Accordingly, the tour agent is acting as a principal and should issue a tax invoice for the sale of the air ticket by the tour agent to the passenger.


Outbound Tour  

10. I am operating a travel agency business that markets overseas land/ground tour package on behalf of an FTA. Do I need to charge GST on the commission charged to the FTA and on the sale of the overseas land/ground tour package to the traveller?

The sale of the outbound package and the agency services are not subject to GST.

11. I have booked an outbound tour package to London through AA Travel and Tours. The package includes a pickup from my house to the airport and an onward journey to London. Is the package subject to GST?  

The package is a zero rated supply but the pick-up from house to airport is subject to GST at a standard rate because the supply is made by a different supplier.

(If the pickup services from house to airport is included in the outbound tour package, it will be zero rated. If the pickup services charged separately by travel agent, it is subject to GST at a standard rate.)

12. Are organized day trips by rail from Malaysia to Bangkok subject to GST? 

The organized day trips are not subject to GST and any commission charged by the LTA to the railway authorities in Malaysia are subject to GST at a standard rate.


Inbound Tour  

13. If an FTA sells an inbound tour package on behalf of LTA, is GST chargeable on the tour package sold or commission charged by the FTA?

The inbound tour package sold and the commission charged by the LTA is subject to GST. The LTA has to account for the GST using the reverse charge mechanism.

14. How do I calculate GST on regional packaged tours that I provide (covering Malaysia and neighbouring countries) to a tourist?  

Travel products which are to be consumed or enjoyed in Malaysia are subject to GST. Outbound packaged tours are zero rated supplies as it is to be consumed or enjoyed overseas.

Example 1 

Rates for the provision of a regional tour package (exclusive of GST):

Tour  Charges (RM) GST (RM) 
2 days, 1 night in Malaysia  800.00  48.00 
3 days, 2 nights in Singapore  1,200.00  NIL 
2 days, 1 night in Bangkok  1,500.00  NIL 
  3,500.00  48.00 
Total charges to tourist    3,548.00


Time of supply  

15. If I am a LTA or tour operator who works on commission basis. When is my time of supply to account for tax on the tour services that I render?

Your time of supply is the earliest of the following:

(a) Your services are fully performed

(b) You issue a tax invoice issued to your principal or customers, or

(c) You received payment for your services. 

However, if a tax invoice is issued within 21 days after (a), then your time of supply is the date of the issuance of the tax invoice.

16. As a travel agent I often make supplies on behalf of my principal. Who is accountable for GST on the supplies made? 

You must account for GST if you provide your services to hotels, airline companies etc., in your own name. However, if you are making these supplies on behalf of your principal, then your principal is accountable for the GST imposed and entitled to claim input tax credit on the purchases you made on his behalf. You may seek a disbursement from your principal for the purchases you made in his name.


Tax Invoice  

17. As a LTA, am I required to issue tax invoices to all my customers? 

Yes, you are required to do so if you are a registered person. However, if you make zero rated supplies, you may not have to issue a tax invoice subject to an approval by the Director General of Customs.


Transitional issues 

18. What is the GST treatment on sale of air ticket or tour package before 1.4.2015 but supplied on or after 1.4.2015?

The sale price is deemed inclusive of GST and the supplier of such services has to account for GST in his first taxable period if he is registered for GST.

19. What is the GST treatment on sale of air ticket or tour package sold on 30 March 2015 and there was a cancellation on 5 May 2015?  

The GST registered supplier may raise a credit note for the supply and make adjustments to his output tax in his return for the taxable period the credit note was raised.

20. What is the GST treatment on the collections made by a vending machine operator if he removes the coins on 5 April 2015 from the machine?  

The removal of the collections is not be subject to GST. However, any subsequent removal will be deemed inclusive of tax.


Miscellaneous  

21. If I provide free bus transport to and from the airport to my customers, do I need not account for GST on the service provided?

If you supply free services to your customers, it is treated as if you have not made a supply for GST purposes and do not have to account for GST.

22. Do I have to charge GST on cash advances? 

The provision of cash advances is an exempt supply and not subject to GST.

23. What is the GST treatment on travel package booked using frequent flyer points?  

(a) The whole tour package is subject to GST.

(b) The redemption of frequent flyer point is not subject to GST.

Example 3

Tour package cost                     RM 2,000.00

GST @ 6%                                  RM 120.00

Redemption flyer point value  RM 1,000.00

Balance (inclusive of GST)      RM 1,120.00 

24. Is the flight from Kota Kinabalu to KLIA to Amsterdam (supplied by MAS under “code sharing’ with KLM) fully eligible for zero rating i.e. allowed to zero rate the domestic leg as well as international portion? (The ticket is supplied by MAS).

Yes, the domestic leg can be zero rated because it is under “code sharing” with KLM. (The ticket is supplied by MAS). 
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