A cancellation policy that matches what your suppliers refund

Every agency has a cancellation charges slab pasted somewhere in its quotation PDF: 30 days, 15 days, 7 days, the usual ladder. Almost none of them were built by checking what the hotel, the DMC or the airline actually refunds on those same dates. That gap is where agencies quietly bleed money, and increasingly, where they lose in consumer court too.

In May 2026 a Mumbai consumer commission ordered MakeMyTrip to refund ₹86,000 plus ₹30,000 compensation and ₹5,000 costs to a traveller whose Spain package was cancelled, ruling the handling an unfair trade practice, according to Free Press Journal. If a company that size can get this wrong, a five-person agency running its slab on guesswork has no chance if a client pushes back.

This post is about treating your cancellation policy as a financial instrument, not a paragraph. Every slab you offer has to be backed by what you get back from your suppliers on that date. Otherwise, you're writing free insurance and hoping nobody claims it.

Why "non-refundable" doesn't hold up anymore

The instinct to write "package is fully non-refundable once booked" is understandable. It's simple, and it protects you from every edge case. It's also increasingly indefensible when a client challenges it, because a blanket clause with no reasoning behind it reads to a consumer commission as exactly what it is: a term written for the agency's convenience, not because the money was actually spent.

Consumer Protection Act 2019 claims over delayed package refunds are commonly built around interest on the withheld amount, with claimants seeking 9–12% p.a. and commissions awarding around 6% in at least one 2026 airline-and-agency case out of Chandigarh, per The Tribune. That interest is on top of the principal, plus whatever compensation the commission decides for the client's harassment. A slab you can't defend with paperwork is a slab you will eventually pay for twice.

The fix isn't "always refund everything." It's "refund exactly what you were refunded, and be able to show your working." For the clause language that actually survives a commission's scrutiny, see cancellation terms that survive consumer court. This post is about the money behind those clauses.

The back-to-back method: map supplier retention to client slabs

The method is simple to describe and mildly tedious to execute, which is exactly why most agencies skip it:

1. List every supplier in the package: hotels, the ground DMC, the airline or rail booking, any add-on (adventure activity, cruise cabin, visa appointment).
2. Pull each one's actual cancellation terms from the contract, voucher or fare rule, not from memory.
3. Line up the date bands. Suppliers rarely use identical cut-offs, so you'll get a messy grid: the hotel's "free up to 30 days" doesn't match the DMC's "free up to 21 days."
4. For every date on the calendar, your client-facing slab can be no more generous than your most restrictive supplier for that date. If the hotel keeps 50% at day 20 but the DMC keeps 100%, your day-20 client retention has to cover the DMC's 100% at minimum, plus your own service fee.
5. Add a service-fee floor on top, non-negotiable, because your planning time was spent whether or not the trip happens. This is covered in more detail in charging planning fees.

Example: Say you're quoting a 6-night Bali package at ₹1,45,000 per couple. The hotel block is free to cancel up to 30 days out, 50% retained 15–29 days, 100% under 15 days. The ground DMC (transport, guide, activities) is non-refundable once confirmed, which in practice happens at booking. The return flight is a discounted fare, non-refundable from the day of issue.

If your client-facing slab says "free cancellation up to 15 days," you are personally underwriting the DMC's 100% retention and the flight's non-refundable fare from day one, for every booking, whether or not it's ever cancelled. That's not flexibility, it's a standing liability you never priced in.

A slab structure you can adapt

Once you've done the mapping above for your own supplier mix, you'll land on bands that look broadly similar across the trade. Published Indian operator slabs cluster around this shape, which is a reasonable starting template to adjust against your own contracts rather than copy outright, per Caper Travel:

Days before departure	Typical retention	What it should map to
60+ days	10–20%	Your service fee plus any non-refundable deposit already paid to suppliers
34–15 days	~50%	Hotel/DMC bands that have moved past free-cancellation windows
14–8 days	~70%	Bands where most suppliers are at or near full retention
7 days / no-show	100%	Suppliers have already been paid in full and won't return it

Treat this table as a shape, not a script. If your typical package leans on suppliers who lock in earlier (a peak-season Ladakh fixed departure with non-refundable permits and transport booked 45 days out, for instance), your slab needs to tighten earlier too. The fixed-departure math behind FOC seats and break-even dates in fixed departure maths is the same discipline applied to group economics instead of individual refunds.

Building in your service-fee floor

The row that agencies most often forget is the 60+ day band. "Free cancellation" sounds generous and costs you nothing if the client genuinely cancels the day after booking with zero supplier commitment made. But the moment you've paid even a token deposit to hold a hotel block or a DMC slot, "free cancellation" means the agency eats that deposit alone.

The cleaner structure: quote a service fee separately, or ring-fence a small percentage (commonly the 10–20% figure operators publish at the 60-day mark) as always retained, positioned explicitly as covering planning time and any non-refundable advances already committed on the client's behalf. Say this plainly in the T&C rather than burying it. Clients accept a stated floor far better than a surprise deduction from what they expected back in full.

What "kitna dena hai" actually means in rupees

When a client cancels 20 days out on that ₹1,45,000 Bali package and asks how much comes back, the honest answer traces straight to your supplier paperwork, not to the slab table alone.

Example: At day 20, your slab (mirroring the hotel's 50% band, since that's your most restrictive live supplier at that point) retains 50%: ₹72,500. Refund due: ₹72,500. If the client challenges this, you produce the hotel's cancellation policy showing you were charged the same 50% and simply passed it through, plus your service fee line item showing what portion of the retention was yours versus the supplier's. That paper trail is the difference between a clause that survives scrutiny and one that gets read as arbitrary.

Keep this documentation habit for every cancellation, not just disputed ones. A consumer commission (or an upset client on WhatsApp) responds far better to "here's exactly what the hotel kept and here's our fee" than to "policy hai, refund nahi milega."

Careful: Refunding late is its own separate liability, independent of how fair your slab percentage is. Commissions have been willing to add interest and compensation specifically for delay, on top of ordering the principal refunded, per The Tribune. A correct slab that takes two months to actually pay out is worse, financially, than a slightly-too-generous slab paid within a week.

The legal red lines killing agencies in 2025-26

Two patterns are showing up repeatedly in the cases making trade news, and both are avoidable:

• Blanket "non-refundable" with no supplier basis. A clause that retains 100% regardless of how far out the client cancels, with no reference to what suppliers actually charged, reads as a term written purely to protect the agency's cash flow. That's close to the reasoning a commission used against the MakeMyTrip cancellation handling in the Spain package case above.
• Slow refunds. Even a fair, well-documented slab can generate a claim if the refund itself takes weeks. Refunds that drag on for months after a cancellation, followed by a partial or delayed payment, are the pattern that draws interest awards and compensation on top of the principal.

The commercial fix for both is the same one already in this post: match your slab to your suppliers so it's defensible, and pay out fast because the deduction is real and documented, not disputed.

Common questions

Is a non-refundable booking legal in India?

Not automatically. A non-refundable clause can be enforceable if it genuinely reflects a non-refundable supplier charge, such as an already-issued non-refundable airfare. It becomes vulnerable when it's a blanket agency-wide policy unconnected to any actual supplier loss, which is closer to what recent consumer commission orders have pushed back on.

How do I decide my cancellation charges slab as a tour operator?

Map every supplier's own cancellation terms against your departure date calendar, take the most restrictive supplier for each date band as your floor, and add your service fee on top. Don't set a slab more generous than your tightest supplier commitment for that date.

What should I actually refund when a customer cancels?

Whatever you were refunded by suppliers for that date, minus your stated service fee, paid out promptly. Delayed refunds carry their own separate liability regardless of whether the deduction itself was fair.

The short version

• Build your slab from actual supplier cancellation terms, not a copy-pasted template. Map each hotel, DMC and airline band to your calendar first.
• Your client-facing retention for any date can be no lower than your most restrictive live supplier for that date, plus your own service fee.
• Ring-fence a service-fee floor (commonly 10–20% at 60+ days) explicitly for planning time and non-refundable advances, and say so in writing.
• Blanket "non-refundable" clauses with no supplier basis are increasingly losing in consumer commissions, as of July 2026.
• Speed matters as much as fairness. Delayed refunds have drawn interest and compensation on top of the principal in recent orders.
• Document every cancellation's supplier deduction so you can show your working if a client or a commission asks.
• Rules and commission outcomes shift; confirm current consumer protection exposure with your CA or lawyer before finalising T&C language.