The Finance Ministry Tax Research Unit has issued a circular which says that booking of tickets is a ‘contract’ under which the service provider IRCTC/Indian Railways promises to provide services to the customer.

The passengers have to pay more for cancelling the confirmed rail tickets for AC and first class. The cancellation of the confirmed train tickets would now attract a Goods and Services Tax (GST) of 5 percent according to the circular issued by the Ministry of Finance.

The cancellation of air travel or hotel accommodation, where the cancellation charges would be taxed at the same GST rate as applicable to the principal services, would also attract a GST of 5 percent. The cancellation charge is a payment instead of breach , so GST has to be paid according to the Ministry of Finance.

The notification read, “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 breach of contract, it will attract GST."

Indian Railways charges Rs. 240 for cancellation of AC first class or AC executive class ticket 48 hours prior to the departure of the train. If the confirmed ticket is cancelled 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. Passengers have to pay 50 percent of the booking amount if the confirmed tickets are being cancelled between 12 hours and 4 hours.

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