Travelling internationally involves careful planning, including booking flights, hotels, and tour packages. Taxes, particularly the Goods and Services Tax (GST), play a key role in the total cost of travel. While GST affects tour packages both in India and abroad, travel insurance for international trips is treated differently under the latest tax reforms.
Understanding GST and its impact on international travel insurance helps travellers plan budgets better and ensures they get appropriate coverage without unnecessary extra costs.
How GST Applies to the Travel Industry
GST is a tax levied on goods and services across India, and it also applies to the travel sector.
- Tour packages: GST is charged on domestic components of the package, such as sightseeing, and hotel bookings.
- Domestic services: Flights, trains, buses, and hotels within India attract GST according to the category of service.
Clearly displaying GST in invoices ensures transparency, letting travellers see the tax component of their bookings.
Is International Travel Insurance Subject to GST?
Until September 2025, travel insurance for international trips in India was subject to 18% GST. This meant travellers had to pay the premium plus tax. However, recent reforms have changed this:
- International travel insurance premiums are now GST-exempt for individual travellers and families.
- This applies to all standard policies, including multi-trip plans, student travel insurance, and emergency medical cover.
- Only the base premium needs to be paid, with no extra tax component.
This reform makes travel insurance for international trips more affordable and encourages travellers to purchase coverage before leaving India.
How GST on Travel Packages Impacts International Travel Insurance
Even though international travel insurance is GST-free, GST on the travel package itself can still affect overall costs:
- Budgeting: Knowing the GST component of your package helps allocate funds for insurance appropriately.
- Transparency: Separating GST for the package from insurance ensures travellers know exactly what they are paying for.
- Coverage choices: With the insurance premium free from GST, travellers can opt for higher coverage or additional benefits without increasing costs.
In essence, GST affects the total trip cost but no longer directly impacts international travel insurance premiums.
Input Tax Credit (ITC) for Tours and Travels
Input Tax Credit (ITC) allows registered businesses to reclaim GST paid on business-related services. Personal travellers cannot claim ITC on tour packages or international travel insurance.
Businesses can claim ITC if travel is necessary for business purposes and invoices are maintained correctly. For individual travellers, GST (or its absence on insurance) is simply part of the cost of planning the trip.
Conclusion
GST influences the cost of travel packages in India, with rates varying based on service type and hotel or transport category. However, international travel insurance purchased by individual travellers is now GST-free, making coverage more accessible and cost-effective. Understanding these rules helps travellers plan budgets accurately, choose suitable insurance, and enjoy a stress-free international trip.
FAQs
1. Does GST apply to international travel insurance?
No, travel insurance premiums for international trips purchased after September 2025 are GST-free.
2. Can businesses claim ITC on GST for travel packages?
Yes, registered businesses can claim ITC if travel is for business purposes and invoices are properly maintained.
3. Are there different GST rates for hotels and transport in packages?
Yes, hotels and transport within India are taxed at different rates depending on category, usually 12% for 3-star hotels, 18% for 5-star hotels, and 5–12% for transport services.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure/policy wordings carefully for detailed information about risk factors, terms, conditions, and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this information.