How To Start A Travel Agency In India

The travel and tourism industry in India, like most of the world, was among the hardest-hit sectors after the coronavirus began spreading throughout the globe in early 2020. From hotels to airlines, demand slumped across the sector due to the Covid-19 pandemic. This, in turn, affected thousands of travel agencies involved in arranging tours and tickets within India and abroad. But the sector is now recovering as the pandemic wanes and Covid cases fall.

Indeed, the sector is now growing at a rapid pace as people resume travelling both for business and leisure. This makes it an opportune time for entrepreneurs to start a travel agency if they so wish. In fact, the Federation of Indian Chambers of Commerce & Industry, a non-governmental trade association, estimates in a recent report that the country’s travel market is likely to grow from around $80 billion currently to $125 billion by 2027.

But how does one go about starting a travel agency? To begin with, budding entrepreneurs must decide the legal structure of the agency and register it with different regulatory and industry associations. And then, most importantly, arrange the necessary capital to kickstart the venture. Here are a few steps involved in setting up a travel agency.

Business Structure

Making a decision about the agency’s organisational structure or how the entrepreneur wants to manage it is the first step in opening a travel agency.

A limited liability partnership, a regular partnership, a sole proprietorship, or a company can be different options for registration if one wants to operate a travel agency. Each has advantages and restrictions of its own.

A proprietorship offers the convenience of quicker business choices and the freedom to manage the firm how one wants, whereas a company and an LLP would limit responsibilities.

GST Registration And Bank Account

Like any other business, a travel agency will have to be registered under the Goods and Services Tax Act. This can be done by applying online on the government’s GST portal. The registration process usually takes a few weeks.

To be clear, business owners must register their travel agencies under GST as most activities involved in the travel and tourism attract GST. A travel agency will have to levy 18% GST on the services it provides to its customers. Moreover, hotel rooms attract a tax of 12-28% while the rate for air travel varies from 5% to 12%.

While starting the GST registration process, businesses can also simultaneously initiative the process to open a bank account for the agency. The GST number should be linked to the bank account subsequently.

Government Registration

Although it is not required, it is generally a good idea for a travel agency to register with the government. Government approval signifies that the travel firm adheres to strict guidelines and won’t deceive clients.

Travel agencies can either contract the Ministry of Tourism’s travel trade division or submit their registration application online by logging on to etraveltradeapproval.nic.in to register with government authorities.

IATA Registration

Apart from registering with the government, a travel agency should also register with the International Air Transport Association if it wants to provide services for international air travel and flight and hotel bookings.

The IATA is a global organization that represents almost 290 airlines and 83% of international air traffic. The travel agency will have to meet certain basic norms to register with the IATA.

Business owners can log on to the IATA website to register with the industry group. They will need to provide certain details about the business and submit the registration amount to complete the process.

For travel within India, especially through trains, the agency can be registered with Indian Railway Catering and Tourism Corporation, the government-owned company that is in charge of train bookings.

Arrange Finances

An entrepreneur will require financial resources to launch a travel agency, just like any other type of business. The business owner must determine how much capital is required to launch and maintain the enterprise until it begins to earn a profit or stable cash flows.

Along with investing some of their own money in the company, the business owner can also borrow money from a bank or non-banking finance organisation.

However, many lenders are typically cautious about providing business loans to a new entity and would want to see financial documents for a couple of years to approve a business loan.

In such cases, the entrepreneurs can take recourse to personal loans or gold loans in order to ensure the fledgling business has enough capital in the early stages of the business. Once the entity completes a few years of operations, it can seek a business loan to expand the venture.

Conclusion

In India, where growth in the tourism sector is expected to be high in coming years, opening a travel agency can be a lucrative alternative. Banks and non-banking finance companies also provide entrepreneurs with a variety of credit choices to aid in the expansion of their travel businesses. IIFL Finance, for instance, offers a quick, and wholly digital, approval process for gold loans, personal loans as well as business loans.

While the amount under gold loans will depend of the quantity and quality of the gold pledged, IIFL Finance sanctions personal loans of up to Rs 5 lakh and business loans without collateral of as much as Rs 30 lakh through a swift process. The company also offers competitive interest rates and customized repayment options to borrowers.