In today’s competitive business landscape, every penny saved is a penny earned. This saying becomes relevant when considering the input tax credit (ITC) under the Indian Goods and Services Tax (GST) system. Business trips can eat up a sizable chunk of a company’s budget. Everything from airfare to hotel stays to taxi rides has a price tag. What if some of these expenses could be deducted from your GST tax bill? The input tax credit can help with those travelling expenses.
For many organizations, it’s still not clear if they can claim GST on travel costs or not. This is mostly because there isn’t centralized management and there are problems with compliance with different vendors. This is very much the responsibility of expense managers when it comes to the travel expenses and ITC claims in GST bills.
As an expense or travel manager, you might be thinking that is there a solution out there? TaxiVaxi, a complete travel management solution, could be the answer. TaxiVaxi makes business travel easier but also makes sure you’re following GST rules.
This article will explain how input tax credit works in the context of business travel expenses. The blog will provide answer to the very question, “why it’s so important?”. Lastly, how TaxiVaxi can be the one-stop solution for GST-compliant traveling.
Follow along as we break down each of these factors. Blog’s end goal is to make your employees’ business trips not only more pleasant but also more economical.
What is the input tax credit (ITC) in the context of Indian GST?
Definition and Basics of the Input Tax Credit
Businesses in India can reduce their tax bill by claiming a credit for the GST they’ve already paid. This claim can be done through a mechanism called the Input Tax Credit (ITC). The basic concept is to eliminate the “tax on tax” effect that plagued previous tax regimes. Therefore, if you make taxable sales or provide taxable services, you can get the GST you paid on your inputs back.
What is the “input”?
Let’s say your company spent Rs. 800 on GST while you were away on business. In economics jargon, this is an “input” cost. Your company has made sales and must now pay the government Rs 1000 in GST. The “input cost” can be deducted from the total tax due, reducing the amount owed to just Rs 200.
How does it apply to the service industry, especially travel?
The underlying idea for services industry is the same as Goods. But, the service sector has its own unique rules and nuances that must be followed. Business trips, for instance, can rack up a hefty bill for many organizations. Flights, hotels, and cab rides are just some of the major contributor in travel-related costs that are subject to GST. Input tax credit allow businesses to recoup some of the GST they’ve already paid on travelling expenses.
Below are the GST tax slabs for hotels and flights, the two major parts of business travel:
GST applicable on Flights:
| Class or Type | GST Rate |
|---|---|
| Economy Tickets | 5 % |
| Business Class Tickets | 12 % |
GST applicable on Hotels:
| Amount per person / per night | GST Rate |
|---|---|
| Less than Rs 2499 | 12 % |
| Rs 2500 – Rs 7499 | 12 % |
| Above Rs 7500 | 18 % |
The process of reclaiming, however, is not as simple as it may first appear. There are stipulations, such as the expenditure having to be directly related to the operation of the business, and extensive documentation is needed, such as GST-compliant invoices from suppliers.
It is your responsibility as an expense manager to track down GST-compliant invoices from various suppliers in order to claim ITC and cut costs.
Also, when it comes to GST on hotel bookings for your employees, there are a few rules. Your company can only claim the ITC on hotel accommodations for their employees if the hotel is in the same state as the employee.
TaxiVaxi is an example of a managed travel program that can streamline the business travel planning process. TaxiVaxi helps your business claim every rupee it is owed through the input tax credit mechanism by issuing GST-compliant invoices and providing a unified billing system.
Why is the input tax credit important for businesses?
Like a rebate, the ITC provides significant financial benefits for companies. Saving money on operational costs is the most noticeable benefit right away. Businesses can reduce their taxable income by claiming the input tax credit (ITC), which allows them to deduct GST paid on inputs from GST owed on output. This mechanism significantly minimizes the multiplicative impact of taxes, lowering prices and freeing up resources for other uses.
Common Issues with Availing Input Tax Credit on Travelling Expenses
Input tax credit (ITC) has the potential to save your company money, but claiming ITC on travel expenses can be a hassle for you. Let’s examine several problems they have to deal with:
Multiple Vendors
Just picture your monthly inbox being flooded with bills from ten different airlines, five different hotel chains, and a few different kinds of cab services. Given that each supplier has its own GST compliance norms, this can be challenging and risky. It is more challenging to manage invoices in a way that is conducive to claiming ITC when they come from a variety of different places.
Non-Compliant Invoices
Invoices submitted for input tax credit (ITC) purposes must strictly adhere to GST law. If you don’t include your GSTIN or use the wrong tax rate, your claim could be denied. Due to the large number of suppliers, it is likely that some invoices will be incorrect. This puts your ability to reclaim the input tax at risk.
Lack of centralized record-keeping
Your sales team is meeting with clients in Delhi, your marketing team is attending a conference in Mumbai, and your IT department is on a retreat in Goa. It is a logistical nightmare to compile and reconcile travel expenses at the end of the month or quarter because each team keeps its own records.
This disorganized strategy increases the likelihood of making mistakes that could result in legal repercussions and the loss of valuable tax refund opportunities.
However, by using a unified solution for managing business travel expenses, such as TaxiVaxi, your company can avoid these complications and more easily claim the input tax credit to which it is entitled.
How TaxiVaxi Simplifies GST-Compliant Travel Expense Management
For businesses, the GST framework’s confusing regulations can pose a significant obstacle. The good news is that you can count on TaxiVaxi to make things easier for you. Let’s look into why:
Bill-to-Company Invoicing that is GST Compliant
Are you sick of having to chase down suppliers to make sure their invoices comply with GST standards? TaxiVaxi provides comprehensive, GST-compliant invoicing to its business clients. You won’t have to manually check each line to make sure it complies with GST regulations because the platform’s invoices already do that for you.
Streamlined Approval and Record-Keeping Through The Platform
Keeping organized records of business trips is one of the most time-consuming and difficult aspects of managing these costs. The online platform TaxiVaxi streamlines the process with its integrated approval and record-keeping systems. The program logs and organizes every purchase and approval into a central database. This data is accessible in real-time, allowing you to keep a close eye on expenses and compliance, thereby making ITC claims a straightforward process.
TaxiVaxi helps you get closer to maximizing your input tax credit benefits by resolving the common problems associated with GST compliance during business travel. This adds a new layer of financial efficiency, making your business more profitable and agile.
Additional Features Supporting Compliance and Savings
TaxiVaxi goes above and beyond by providing features that not only support GST-compliant invoicing and centralized record-keeping but also bring in significant savings. Now, let’s delve into these:
MIS and Analytics for Travel Expense Management
In this era where data is the new currency, it is essential to have a thorough understanding of your travel budget through the use of analytical tools. You can get detailed reports and analytics for your business trips with TaxiVaxi’s MIS. The system can provide both individual employee travel reports and aggregated data for an entire department. This level of specificity is useful for making data-driven decisions, which in turn helps with compliance and finding ways to cut costs.
Dedicated Relationship Managers for Emergency Support
Unexpected problems are the biggest threat to your travel plans and compliance. TaxiVaxi is aware of this, which is why it provides constant access to its invaluable relationship managers. Whether you need to change your travel plans at the last minute or need a GST-compliant invoice right away, these relationship managers will respond quickly to your needs without sacrificing compliance.
Zero Cancellation Charges on Business Flights
How often have you changed your travel plans at the last minute and been hit with astronomical cancellation fees? You can relax now that you have TaxiVaxi to take care of everything. By eliminating cancellation fees for business trips, you can help your company save money and gain a competitive edge.
TaxiVaxi’s platform is enhanced with these extra features to guarantee GST compliance and bring financial efficiencies that positively affect your business’ bottom line.
Conclusion
Even as business travel management evolves, tax compliance remains a top priority. Input tax credit (ITC) is a difficult beast to tame for businesses due to issues with multiple vendors, non-compliant invoices, and distributed record-keeping. Here’s where TaxiVaxi really shines as an all-in-one solution for all your business travel requirements:
TaxiVaxi’s platform is built to be GST-compliant, so you can easily claim input tax credit on your employees’ travelling expenses. TaxiVaxi even offer a one-stop-shop solution for approval and invoicing. In addition to ensuring compliance, a complete travel management system can help save money by incorporating features like business intelligence and analytics, dedicated relationship managers, and free flight cancellations for business trips.
