Travel & Tourism Industry in India
India's travel and tourism sector is one of the largest industries contributing significantly to GDP and employment. The sector includes travel agencies, tour operators, MICE companies, online travel aggregators, and destination management companies. With growing domestic and international travel, the industry offers substantial opportunities.
Industry Overview
- Contribution to GDP: 9.2% of India's GDP (direct and indirect)
- Employment: 8-9% of total employment in India
- Foreign Tourist Arrivals: 9+ million annually (pre-COVID)
- Domestic Tourism: 2+ billion domestic trips annually
- Growth Projection: 6.8% annual growth expected
Travel Business Models
Travel Agencies
Retail and wholesale ticketing, tour packages, visa services. State license required. IATA accreditation for airline ticketing.
Tour Operators
Inbound, outbound, and domestic tour packages. Ministry of Tourism recognition beneficial. Escort services for groups.
Online Travel Aggregators
OTA platforms for hotels, flights, packages. Technology-driven, high marketing spend, commission-based model.
MICE Operators
Meetings, Incentives, Conferences, Exhibitions. High-value segment, corporate clients, specialized services.
Tourism Business Models
Revenue Streams
| Service | Revenue Model | Typical Margin |
|---|---|---|
| Airline Ticketing | Commission + convenience fee | 5-9% + fees |
| Hotel Bookings | Commission on room nights | 10-25% |
| Tour Packages | Markup on components | 15-30% |
| Visa Services | Service fee per application | ₹500-2,000 |
| Forex | Spread on exchange rate | 1-3% |
Company Registration
Travel businesses require appropriate licensing and registrations to operate legally.
Private Limited Company
Best for: Travel agencies planning scale, multiple locations, franchise model. Benefits: Credibility with suppliers, easier IATA accreditation, limited liability.
LLP / Partnership
Best for: Small to medium agencies, lower compliance, flexible profit sharing. Suitable for family-run businesses.
Travel Agent License
Travel Agent License is required under respective state Travel Agents Regulation Acts for booking services.
Who Needs License?
Required for:
- • Booking air tickets
- • Selling tour packages
- • Hotel reservations as commission agent
- • Visa services for a fee
Not required for: Travel blogging, trip planning consultation only, travel content creation
License Requirements (Typical)
- • Office space (minimum 200 sq ft typically)
- • Qualified staff (IATA-certified manager preferred)
- • Bank guarantee/solvency proof (₹1-5 lakhs)
- • IT infrastructure proof
- • Registration fee (varies by state)
IATA Accreditation
IATA (International Air Transport Association) accreditation allows direct airline ticketing and better commissions.
Benefits of IATA
- • Direct airline commissions
- • Better airfares and inventory
- • BSP (Billing and Settlement Plan) access
- • Industry credibility
- • Global recognition
IATA Requirements
- • Financial stability (bank guarantee ₹25-50 lakhs)
- • Trained staff (IATA certification)
- • Office infrastructure
- • Errors and Omissions insurance
- • Annual fees
Is IATA Mandatory?
No, not mandatory. Can use consolidators for ticketing. However, beneficial for agencies with significant air ticket volume.
Ministry of Tourism Registration
Ministry of Tourism (MOT) recognition provides credibility and access to government benefits.
Categories of MOT Recognition
- • Inbound Tour Operator: Foreign tourists to India
- • Outbound Tour Operator: Indians traveling abroad
- • Domestic Tour Operator: Domestic tourism
- • Travel Agent: Booking services
Benefits of MOT Recognition
- • Credibility and trust
- • Government contract eligibility
- • Marketing support at trade fairs
- • Industry updates and networking
- • Use of MOT logo (subject to terms)
TCS and Taxation
Travel businesses must comply with TCS (Tax Collected at Source) regulations for foreign remittances.
TCS on Foreign Travel (Section 206C)
- • 5% TCS on remittance for foreign tour packages (no threshold)
- • 5% TCS on LRS remittance above ₹7 lakh (20% if no PAN/Aadhaar)
- • Collected by authorized dealer/travel agent
- • Credit available to traveler in tax return
- • Applies to packages including airfare, hotel, sightseeing
GST for Travel Services
| Service | GST Rate | Notes |
|---|---|---|
| Tour Operator Services | 5% (no ITC) / 18% (with ITC) | Can choose option |
| Travel Agent Commission | 18% | Full ITC available |
| Air Tickets | 5% / 12% | Taxed by airline |
| Hotel Commission | 18% | Booking commission |
| Visa Services | 18% | Service fee |
Investment and Costs
Starting a travel agency requires investment in licensing, infrastructure, and working capital.
Initial Investment
- • Company registration: ₹15,000-25,000
- • Travel license: ₹10,000-50,000
- • IATA guarantee: ₹25-50 lakhs (if applicable)
- • Office setup: ₹5-25 lakhs
- • Insurance: ₹1-5 lakhs
Working Capital
- • Airline deposits: ₹5-20 lakhs
- • Hotel advance payments
- • Marketing and advertising
- • Staff salaries
- • Technology and GDS
Frequently Asked Questions
What is IATA and is it mandatory?
IATA (International Air Transport Association) accreditation allows direct ticketing for airlines. Not mandatory but beneficial for: Direct airline commissions, Better airfares, BSP access, Credibility. Requirements: Financial stability (bank guarantee ~₹25-50 lakhs), trained staff, office infrastructure.
What is TCS on foreign travel?
Tax Collection at Source (Section 206C): 5% TCS on remittance for foreign tour packages (no threshold), 5% on LRS remittance above ₹7 lakh, Collected by authorized dealer/travel agent, Credit available to traveler in tax return. Does not apply to individual component bookings by traveler directly.
What is Ministry of Tourism recognition?
Recognized Inbound/Outbound/ Domestic Tour Operator status: Validates credibility, Required for certain government contracts, Marketing support at trade fairs, Access to industry updates. Categories: Inbound, Outbound, Domestic. Requirements: Experience, infrastructure, financial stability.
What GST applies to travel services?
Tour operator services: 5% (no ITC) or 18% (with ITC), Travel agent commission: 18%, Air tickets: Taxed by airline, Hotel commission: 18%, Visa services: 18%. Tour packages: Can opt for 5% without ITC or 18% with ITC benefit.
Key Takeaways for Travel Business
Essential Compliance
- ✓ Travel Agent License
- ✓ IATA (recommended)
- ✓ MOT recognition
- ✓ TCS compliance
- ✓ GST registration
Success Factors
- ✓ Strong supplier network
- ✓ Competitive pricing
- ✓ Quality customer service
- ✓ Digital presence