Selling a package to another agent: where 5% GST stacks twice

A sub-agent asks for your Bali package "at net rate" so he can sell it to his own client. You quote him your standard price, he adds his margin, invoices his client, and everyone assumes the deal is simple because the trip itself doesn't change. The GST on a package sold to another agent does change, and it usually changes in a direction nobody notices until the sub-agent's CA starts asking questions about a blocked input credit.

Here's the mechanic in one line: your 5% tour-operator rate comes with no input tax credit, so when a registered sub-agent buys your package, he can't recover that 5% the way he'd recover GST on almost anything else he buys for the business. It sits inside his cost. He then marks up that already-taxed cost and charges his own 5% on top of it, taxing the same Bali ground cost twice before the client has even paid.

This post works through why that cascade happens, the one narrow exception that can stop it, and the two structures, commission and disclosed agency, that most sub-agent relationships should actually be using instead of a straight resale.

Why 5% without ITC turns into double taxation the moment a second agent buys in

Tour operator services, billed under SAC 998552, attract 5% GST with no input tax credit, on the condition that the invoice shows one gross figure inclusive of accommodation and transportation rather than an itemised cost breakdown (TaxGuru: GST on Tour Operator Services). That trade-off (a low headline rate, no credit) is designed for one thing: a tour operator selling a package straight to the traveller. It was never built for a chain of two or three operators buying from each other.

The moment a second registered agent buys your package to resell it, the arithmetic breaks. Your 5% GST is a real cost to him, not a credit he can set against his own output tax. He has to recover it somehow, and the only lever he has is his own selling price. So the blocked 5% gets folded into what he treats as his "cost," his margin gets applied on top of that inflated cost, and then his own 5% output GST gets applied on top of that. The traveller ends up paying tax on tax on the same underlying hotel and transport spend, and neither agent in the chain can do anything about it under the general rule.

The same-line-of-business exception, and why it rarely rescues the sub-agent

There is one legal way around this, and it's narrower than most agents assume: input tax credit on tour operator services survives, but only when it's charged by another tour operator to a buyer who is himself in the same line of business (TaxGuru: GST on Tour Operator Services). Credit on hotels, cabs or any non-tour-operator supplier still stays blocked regardless of this carve-out.

That sounds like it should fix the sub-agent's problem. In practice, it usually doesn't, and here's the reasoning, stated as reasoning rather than as a cited rule: for a credit to be worth anything, the person holding it needs an output tax liability to net it against. A sub-agent who is himself invoicing onward as a tour operator, with his own 5% package sale to the traveller, has that liability, so the credit has somewhere to go. A sub-agent who resells on pure commission, or who is unregistered, never generates a 5% output liability of his own, so the credit exists on paper and is never actually used.

Most sub-agent relationships in Indian trade look like the second case, not the first. Confirm your own chain's structure with your CA before assuming this exception applies. It's real, but it's easy to claim wrongly and hard to actually benefit from unless both invoices in the chain are genuinely built on the same SAC and the same rate.

One Bali package, sold three ways

Take a Bali land package that costs an operator ₹40,000 to actually deliver: hotels, transfers, a driver-guide, entry tickets. Trade-reported margins for a DMC-to-wholesaler-to-retail chain commonly run 10-25% on hotels and 15-35% on full packages (DMCQuote: Travel Agent Commission Rates 2026, reported by trade sources, not published tariffs). Use those bands: a 15% wholesale margin for the operator, a 25% resale margin for the sub-agent.

Structure 1: Principal-to-principal, both sides selling as tour operators.

Example: Operator A prices the package at 15% over cost: ₹40,000 × 1.15 = ₹46,000. Invoiced as a 998552 tour package, 5% GST = ₹2,300. Sub-agent B pays A a total of ₹48,300.

B can't recover that ₹2,300 as ITC (see above), so his landed cost is the full ₹48,300. He marks up 25% on that landed cost for his own client: ₹48,300 × 1.25 = ₹60,375. He also invoices as a 998552 package, 5% GST = ₹3,019. His client pays ₹63,394.

Total GST collected across the chain: ₹2,300 + ₹3,019 = ₹5,319, none of it creditable to anyone.

Structure 2: Net rate plus a disclosed commission at 18%.

The alternative to the 5% package model is booking as an agent and charging a fee or commission, taxed at 18% on the fee or commission only, with full ITC available on the agent's own business inputs (TaxGuru: GST on Tour Operator Services).

Example: A invoices the traveller directly for the same ₹46,000 package (5% GST = ₹2,300, client pays A ₹48,300). B never resells the package at all. Instead, B invoices the client a booking and planning fee of ₹12,000, roughly matching the margin he held in Structure 1, at 18% GST = ₹2,160. Client pays B ₹14,160.

Client's total outlay: ₹48,300 + ₹14,160 = ₹62,460. Total GST across the chain: ₹2,300 + ₹2,160 = ₹4,460. B's commission income is now taxed at a normal 18% rate with full ITC on his own office and marketing costs, instead of sitting inside the no-ITC 5% bracket.

Structure 3: Disclosed agency, where B sells on A's behalf.

Here the client only ever deals with B, but B is contractually and on the invoice A's disclosed agent, not an independent reseller. A remains the principal and the invoice of record; B's earning is a commission A pays him privately (₹12,000 + 18% GST = ₹2,160, invoiced by B to A). Because a commission or agency fee is a normal business input for A, not a purchase of a blocked tour-operator service, A can claim ITC on that ₹2,160, so his real cash cost of paying B nets back to ₹12,000. The client's bill stays close to A's own ₹48,300, since B's earning is settled behind the scenes rather than stacked visibly on top.

Structure	Client pays	Total GST in chain	Who can recover GST
1. Principal-to-principal	₹63,394	₹5,319	Nobody
2. Net rate + commission	₹62,460	₹4,460	B (ITC on his own inputs)
3. Disclosed agency	~₹48,300 to client + private commission	₹2,300 net to A after ITC	A (ITC on B's commission)

Three structures, roughly the same combined margin between the two agents, meaningfully different tax cost and client-facing price. That gap is what "selling a package to another agent" actually costs when nobody thinks about the invoicing.

Why the sub-agent's price to the client ends up higher than yours

In Structure 1, the blocked ₹2,300 doesn't disappear, it becomes part of B's cost base before his own margin is even calculated. His 25% markup is applied to ₹48,300, not to the ₹46,000 the package was actually worth, so the markup itself grows to compensate for tax that was never really "his" cost of doing business. Then his own 5% is applied to that already-inflated figure. The client is paying B's margin on the tax, and tax on B's margin, in the same invoice.

Structures 2 and 3 avoid this because GST only ever touches the value each party is genuinely adding: A's 5% touches the package once, and B's 18% (in Structure 2) or A's recoverable 18% (in Structure 3) touches only the service fee, not the whole resold value. That's the whole difference between an operator-to-operator resale and an agency or commission arrangement: one taxes the full chain twice, the other taxes each layer once.

'Net plus your markup' is not a tax position

"Sell it for net plus whatever you want" is a common way operators quote sub-agents, and it's an informal price instruction, not a GST structure. It says nothing about who invoices the traveller, who is legally the principal for GST purposes, or which SAC code and rate apply to either leg of the deal. Two agents can shake hands on that exact sentence and end up in Structure 1, Structure 2, or an undisclosed mess that's neither, depending entirely on how the paperwork is actually cut afterward.

A disclosed-principal structure (Structures 2 and 3 above) states, in writing and on the invoice, who the traveller is legally contracting with. An undisclosed one leaves that open, which is exactly the gap a GST officer or a consumer-court complaint will ask about later. The verbal deal decides pricing. The paperwork decides the tax outcome, and it decides it regardless of what was agreed on WhatsApp.

What the invoice and the agreement need to say for the structure to survive an assessment

A GST tax invoice needs roughly 16 mandatory fields under CGST Rule 46, including both parties' GSTINs, a serial number, place of supply, the correct SAC code, and the CGST/SGST or IGST split; a missing field is the most common reason a B2B invoice gets rejected or flagged at reconciliation (ClearTax: GST Invoice Format and Rule 46 fields). For a resold package that means, concretely:

1. Use SAC 998552 for a genuine tour-package resale at 5%, and SAC 998555 for a service-charge or commission line at 18%, matching common trade practice for how these codes get used (this is trade convention, not a gazetted classification you'll find cited against an official code list, so verify with your CA before standardising it).
2. Do not stretch Rule 33's pure-agent test to cover a marked-up net-rate resale. Pure agent treatment requires a contract authorising you to incur cost on the client's behalf, an invoice that separately shows the reimbursed amount, and recovery of exactly what was paid, with zero markup (TaxGuru: Pure Agent Concept under GST). A sub-agent who adds even ₹1 of margin to the "net rate" line has already failed that test.
3. If you're using a disclosed-agency structure, put it in a written agreement, not just an invoice line: who is the principal, who bears liability to the traveller if the trip goes wrong, and how the commission is calculated and paid.

Careful: DRC-01C is an automated notice issued when ITC claimed in GSTR-3B exceeds what's available in GSTR-2B, and it is currently landing disproportionately on 5%-rate tour operators (GSTN user manual on ITC return compliance). A wrongly claimed same-line-of-business credit, or an 998552 invoice that should have been an 998555 service invoice, is exactly the mismatch that triggers one. If a demand is confirmed after assessment, the penalty is 10% of the tax involved for ordinary cases under Section 73, or up to 100% under Section 74 where fraud or wilful suppression is alleged, plus 18% annual interest running from the original due date, not the notice date (IncorpX: Responding to a GST ITC-mismatch notice).

For the wider question of which line goes on which invoice at what rate, the general 5% or 18% decision on a package invoice and the full 5% vs 18% ITC arithmetic are worth reading alongside this one, since they're the same underlying rate call, just for a B2C sale rather than a B2B resale. The GST invoice format for a travel agency covers the Rule 46 field list in full if you're rebuilding your invoice template from scratch.

Which structure actually leaves the most money in the chain

For small, price-sensitive B2C add-on sales between two agents who both want the simplicity of being independent tour operators, Structure 1 still wins on ease even though it cascades. The tax cost on a small ticket item is often smaller in rupee terms than the paperwork it would take to avoid it.

For anything with real value on the line, Structure 2 usually wins, and wins even harder if the sub-agent's own client is a GST-registered corporate buyer who can claim ITC on that 18% fee, effectively erasing the tax cost on his side.

Structure 3 is the right call when the sub-agent has no interest in being the principal: no liability if the hotel walks the group or the itinerary breaks mid-trip, just referral or booking income. He stays an agent, you stay the operator of record, and the money flows the way a B2C, B2B or DMC chain is actually built rather than each hop pretending to be a fresh retail sale. Formalising this across several sub-agents rather than one-off deals is worth doing on paper, not just on a phone call.

Common questions

Can the sub-agent just raise his own 5% package invoice instead of reselling mine?

Yes, and that's legally fine on its own; a sub-agent can act as an independent tour operator with his own 998552 invoice at 5%, no ITC either way. That's exactly Structure 1 above. It isn't illegal, it just stacks tax on tax across the two invoices, which is the cost this post is walking through, not a compliance defect in either invoice individually.

Does it matter if the sub-agent is unregistered?

It changes the shape of the problem rather than removing it. An unregistered sub-agent can't issue GST invoices at all, so the ITC question never arises for him specifically, and these relationships usually end up looking closer to Structure 3 by default: he refers or markets, the registered operator remains the principal and invoices the traveller, and the sub-agent is paid an informal commission outside the GST chain.

What changes if the client is a GST-registered corporate buyer, not a retail traveller?

A corporate buyer can claim ITC on an 18% commission or service-fee component, the same way any other business input works for them, but they still can't recover GST on the 5% no-ITC tour-operator package layer, regardless of who they buy it from. That makes Structures 2 and 3, which route more of the value through an 18% fee rather than a stacked 5% resale, meaningfully more attractive when your buyer is corporate.

Does this cascade apply to domestic packages too, or only outbound ones like Bali?

The mechanics are identical for a domestic package. A Kerala or Rajasthan circuit sold operator-to-agent-to-traveller runs into the same blocked-ITC cascade as a Bali package sold the same way; the 5% no-ITC rate and the resale problem don't care whether the destination is inside or outside India. What changes for an outbound trip is a separate remittance-related tax that applies on top, which is outside the scope of this post and worth checking with your CA rather than assuming a rate.

The short version

• Selling a 5% no-ITC package to another agent doesn't remove the tax, it compounds it: the sub-agent's blocked GST becomes part of his cost base, and his own margin plus his own 5% then sit on top of that.
• The same-line-of-business ITC exception is real but narrow. It only actually helps a sub-agent who is himself invoicing onward as a 5% tour operator with his own output liability to net the credit against, which most commission-based resellers aren't.
• On a worked Bali example, principal-to-principal resale collected ₹5,319 in GST across the chain versus ₹4,460 for a net-rate-plus-commission structure, for a broadly comparable combined margin.
• "Net plus your markup" is a price instruction, not a tax structure. The invoices and any written agreement, not the verbal deal, decide who is the principal, which SAC code applies, and who owes what.
• Get the SAC code, the rate, or the pure-agent test wrong and it's not just extra tax: a mismatched ITC claim is a known trigger for a DRC-01C notice, and a confirmed demand adds 10-100% penalty plus 18% annual interest.
• Structure by the relationship: independent resale for small, low-friction tickets; disclosed commission when your buyer can use the 18% ITC; disclosed agency when the sub-agent wants referral income without taking on delivery liability.
• Confirm the exact structure, SAC codes and rates with your CA before standardising this across your sub-agent network. This reflects reported trade practice as of August 2026, not settled case law on this fact pattern.