How to start a travel agency in India

Would you like to start your own travel agency in India? If so, this article is going to help you. You’re going to read about the subject here – How to start a travel agency?

How to start a travel agency in India

The travel and tourism industry is one of India’s largest industries and a major generator of jobs. According to the UN World Tourism Organization (UNWTO), through the multiplier effect, the travel and tourism industry directly and much more indirectly offers 6-7 percent of the world’s total employment. In terms of GDP contribution, India’s travel and tourism industry ranks 12th out of 184 nations, and India’s tourism industry is set to expand at 7.8 percent per year in 2013-2023. The travel and tourism market in India, projected at USD 117.7 billion in 2011, is estimated to boom to USD 418.9 billion by 2022 and thus there is plenty of chance for fresh travel and tourism entrepreneurs to start as travel agents. In this article, we look at the laws, regulations and taxation problems to start a company in India with a travel agency.

Business entity choice

Today travel agents have many business entity alternatives to choose from and the business plan for the company would play a significant part in finding the correct fit. Most travel agents choose a Private Limited Company because it is one of India’s most commonly used and acknowledged business forms providing a host of advantages. A private restricted company is certainly a must for businessmen who are planning to deliver their services online and expand their business rapidly – using web authority. On the other side, newly established company organizations such as Limited Liability Partnership (LLP) or One Person Company (OPC) would be perfect for businessmen planning to construct the company slowly and/or part-time. Since Limited Liability Partnerships do not have an audit requirement unless the turnover exceeds Rs.40 lakhs in a year, it would be perfect for entrepreneurs who gain first-hand experience in their business. OPCs, on the other side, would be perfect for entrepreneurs setting up their company as a single person who want to prevent complying with comprehensive demands linked to compliance. Either way it would be perfect for a travel agent to have a business entity offering limited liability status and separate legal entity status.

Entrepreneurs can also opt for trademark proprietorships in cases where the entrepreneur wants to have a unique brand name that can not be registered with the Ministry of Company Affairs due to the naming guidelines.

Registration of service tax

A travel agent’s services are taxable under service tax and therefore travel agent is needed to acquire a service tax registration. Small-scale travel agents, however, have the choice of exempting service tax if the aggregate turnover of taxable services in a financial year does not exceed Rs. 10 lakhs. Therefore, if the aggregate value of taxable services in a financial year does not exceed Rs.10 lakhs, the travel agent may claim service tax exemption benefit and not pay service tax until the turnover in a financial year crosses Rs.10 lakhs.

Moreover, services supplied by travel agents are not taxed at the usual 12.36 percent service tax level, but are taxed at various prices depending on the type of service given. By Notification No. 26/2012 – Service Tax of 20.6.12, the Ministry of Finance offers some reduction to decrease the service tax burden on tour operators / travel agents. Accordingly, travel agent services are taxed only on a portion of the complete value of service rendered as below:

How to start a travel agency in India

[table] Sl. No, Service Provided, Service Tax Levied on % of Bill Amount

  1. Services  by a tour operator in relation to a package tour, 25%
  2. Services provided by a tour operator solely for arranging or booking accommodation for any person in relation to a tour, 10%
  3. Services provided by a tour operator not mentioned in point 2 or point 3, 40% [/table]

As per 6(7) of the Service Tax Rules, travel agents may pay service tax in the case of air travel. In accordance with the law, national tickets are taxed at 0.6% of the fundamental fare and global tickets are taxed at 1.2% of the fundamental fare. Basic fare is the fare on which the airlines are paying commission.

Becoming a Government of India approved Travel Agent

Although registration as a Travel Agent authorized by the Government of India is not compulsory, it is useful and recognizes the travel agent. The purpose and objective of the Travel Agent / Agency (TA) identification system is to promote quality and service standards in this tourism industry. In order to become a travel agent acknowledged by the Government of India, the travel agent must meet certain requirements regarding capital invested, amount of employees employed, maintenance of minimum office space and other requirements. In addition, a request must be submitted to the Ministry of Tourism in the format required to become a Travel Agent approved by the Government of India.

Becoming an IATA Agent

The International Air Transport Association (IATA), representing some 240 airlines or 84 percent of total air traffic, is the trade association for the world’s airlines. IATA provides extensive training and professional development services to travel agents, and IATA accreditation is a worldwide acknowledged seal of approval. Therefore, it is essential for travel agents to consider becoming members of IATA and enjoy access to a range of instruments and advantages.

Thus, these are the requirements which you should look upon if you want to start a travel agency.

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