Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, April 1, 2013

Applicability of Service Tax on Tour & Travel Operator


Who is a “Tour Operator” under the Service Tax Laws?
Tour operator means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.


What is the value of taxable service provided by a tour operator?
The value of taxable service provided by a tour operator to a client is the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour.


What are the rates of service tax applicable on various services provided by a tour operator?
S.No.
Taxable Service
Partial abatement/ Composition Scheme
Conditions
Statutory Reference
1
Accommodation booking service
10% of amount charged
1) No CENVAT Credit.
2) Invoice should be inclusive of cost of accommodation
S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
2
Package tours - wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided as part of the package
Tax is payable on 25% of gross amount charged
1)  No CENVAT credit available.
2)  Bill to be inclusive of all charges for the tour.
S. No. 11(i) of Notif. No. 26/2012-ST dt 20.6.12
3
Tour operator – providing services solely of arranging or booking accommodation for any person in relation to a tour.
Tax is payable on 10% of  amount charged
1)  No CENVAT credit available.
2)  Bill to be inclusive of all charges for such accommodation.
3)  This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
4
Tour operator – Other than abovementioned services

Tax is payable on 40% of amount charged.
1)  No CENVAT credit available.
2)  Bill to be inclusive of all charges for the tour.
3)  The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.
S. No. 11(iii) of Notif. No. 26/2012-ST dt 20.6.12
5
Air Travel Agent
Option to pay service tax at flat rate on ‘basic fare’ @0.6% in case of domestic booking and 1.2% in case of international booking – plus E. Cess
No restriction on availment of CENVAT credit.
Option, once exercised, will apply uniformly in respect of all the bookings of passage for travel by air made during the financial year.
Rule 6(7) of Service Tax Rules

Who is an Air Travel Agent? Are his services chargeable to Service Tax?
An “Air Travel Agent” is any person engaged in providing any service connected with the booking of passage for travel by air.
Any service provided or to be provided to any person, by an air travel agent in relation to booking of passage for travel by air is a taxable service.


How is the taxable value of service provided by an air travel agent to be computed? What are the specific inclusions or exclusions?
In case of air travel agent, the value of taxable service is the gross amount charged by such agent from the customer for services in relation to the booking of passage for travel by air, excluding the air fare but including the commission, if any received from airline in relation to such booking.
Thus, the value of taxable services will include the commission received by the travel agent from the airline. However, it will exclude the fare amount collected from the customer.
The air travel agents receive certain commission for domestic and international tickets from the airlines. The details of the commissions payable by the airlines is indicated in the agency agreement entered into between the airline and the air travel agent. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, fare collected and the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the airlines. This fortnightly return would be the basis for assessment of Service Tax in respect of air travel agents.


Can the air travel agent pay service tax under any composition scheme?
An option has been given to the air travel agents to pay the Service Tax under the composition scheme as follows:
·         For booking domestic tickets: @ 0.6% of the basic fare
·         For booking international tickets: @ 1.2% of the basic fare
The basic fare is defined as that part of the fare on which commission is payable by the airlines.
E. Cess and S. H. E. Cess @3% of the tax amount determined as above will be payable additionally.



Which are the specified categories of persons, providing services to whom are exempt from service tax?
Services provided to the following persons are fully exempt:
·         United Nations or any such specified International Organization
·         Office of a foreign diplomatic mission or consular post in India
·         Personal use or for the use of family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India

What is the place of provision of passenger transportation services?
The place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey.


What does a “continuous journey” mean?
A “continuous journey” means a journey for which:-
(i)                  a single ticket has been issued for the entire journey; or
(ii)                more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey.


What is the meaning of a stopover? Do all stopovers break a continuous journey?
“Stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued. Thus a travel on Delhi-London-New York-London-Delhi on a single ticket with a halt at London on either side, or even both, will be covered by the definition of continuous journey. However if a separate ticket is issued, say New York-Boston-New York, the same will be outside the scope of a continuous journey.

Whether service tax will apply on related fees/charges on journeys starting outside India, even if the transaction for related charges is made in India?
and
Whether service tax will apply on related fee charges on journeys starting in India, even if the transaction for related charges is made outside India?

As per Clarification given in Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012:

According to Rule 11 of Place of Provision of Services Rules, 2012, the place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. Therefore, if place of embarkation of passenger is located within the taxable territory, service tax is leviable on the gross amount payable for such continuous journey, irrespective of where the ticket is booked and where fees/charges are collected. If the place of embarkation of a passenger on a continuous journey falls outside the taxable territory, service tax is not leviable, irrespective of where the tickets are booked and where fees/charges are collected. However, only such charge will be determined under Rule 11 of POP as are directly related to the continuous journey. The POP of other charges will be judged on their own merits.”
However, it is to be noted that as per Rule 8 of Place of Provision for Service Rules, 2012, where the service receiver and service provider are located in the taxable territory, the provision of service would be the location of service receiver irrespective of where the service is performed, delivered or consumed.
For determining “location of service” as above, if the service recipient has obtained service tax registration, it is the registered premises of the service receiver. However, if the service receiver is not registered under service tax, his location will be determined as follows:
1.       Location of business establishment
2.       Location of fixed establishment
3.       Where services are used at more than one establishment, the establishment most directly concerned with the use of service
4.       In the absence of above, the usual place of residence.

60 comments:

  1. Is service tax applicable on foreign tours not starting from India ? if yes then from which this has been made applicable ? what are the rates % applicable on tour packages

    thanks

    ReplyDelete
  2. I have really read this blog completely and this incident has undergone after a long time. At all, I have felt to bookmark it as this article is awesome.
    travel operator

    ReplyDelete
  3. I have read several articles in this topic but it seems that your article has made me confident enough to master upon it. I think it’s greatly a necessary article which is amazing with its technique to understand.
    travel operator

    ReplyDelete
  4. in case of tour operator (40 % ) is reverse charge mech. applicable? if at both ends service provider and receiver is company , who has to pay service tax? at which rate

    ReplyDelete
  5. I am a Air travel agent; I want to know that I buy ticket from a IATA travel agent say ticket fare is 5000, commission is 100, TDS is 10 and S Tax on commission is 12 so I paid IATA agent is Rs. 4922. I raise invoice of Rs. 5000 + 200 S Charge + S Tax is 25; So i collected from customer is 5225.

    Now my question is how much Service Tax return should I file, is it Rs. 25 or 37(25+12) or 13(25-12)

    ReplyDelete
  6. I have read several articles in this topic but it seems that your article has made me confident enough to master upon it. I think it’s greatly a necessary article which is amazing with its technique to understand.
    tours and travels

    ReplyDelete
  7. whether on the Tour operator service in case of service provide is a company the RCM is applicable or not

    ReplyDelete
  8. I would like to appreciate this article as it’s the best one in attracting its audience via unique yet essential points as well as the clarity it assists in making us understand its motive.
    travel operator

    ReplyDelete
  9. dear sir w.f 2007-08 , 2008-09, 2009-10, 2010-11 service tax rate
    TOUR PACKAGE RATE -
    ONLY HOTEL ACCOMMODATION-
    HOTEL ACCOMMODATION WITH MEALS-
    DOMESTIC AIR TICKET-
    INTERNAIONAL AIR TICKET-
    RAIL TICKET-
    ONLY TRANSPORT-
    Dear sir please send me service tax rate my mail id ravikumar.kumar309@gmail.com

    ReplyDelete
  10. Well, there are a very high number of tour operators in India availing flexible and affordable packages to people from India and foreigners as well. Hiring tour operator is a very good choice really to stay away from the overhead of managing the things by own. With the availability so many of them people must choose the best tour operators in India and one of them can be found at http://www.wedriveindia.com

    ReplyDelete
  11. I am a Air travel agent; I want to know that I buy ticket from a IATA travel agent say ticket fare is 5000, commission is 100, TDS is 10 and S Tax on commission is 12 so I paid IATA agent is Rs. 4922. I raise invoice of Rs. 5000 + 200 S Charge + S Tax is 25; So i collected from customer is 5225.

    Now my question is how much Service Tax paid- A) 25 , B) 25-12= 13

    ReplyDelete
    Replies
    1. Dear Rakesh

      Suppose

      Ticket amount = Rs.10,000.00
      Commission Rs.200 PP X 02 Pax = Rs.400.00
      Service tax on commission @ 12.36% = 49
      Total of bill = Rs.10449 (charged from client)

      Tax payable to government = Rs.49.00

      Delete
    2. #divine travel what about that Rs. 200 that is charged from customer as service charge??? and what exactly is service charge ? is it a part of commission or something else.

      Delete
    3. i am not IATA agent ticket purchase from other agent all ticket commission rec. ( 100 commission and 15 service tax paid )
      my billing issue corporate client 200 service + service tax 30
      but no idea tax deposited amount option A Rs.30 or option B ( 30-15 = 15 ) please advice me and pleaes send the your cell no.
      my mobile no. 9891829344, email id- rakesh_prajapati12@yahoo.co.in

      Delete
  12. I am a tour operator providing services to other tour operators who are also paying service tax.So, is it necessary to pay service tax by both the tour operators.for the same service.?

    ReplyDelete
  13. Is service tax applicable the same for Inbound tour operators ? There is no clear clarification whether operators earning FOREX through inbound tour operation are exempted to pay ST as the earnings are in USD. There is a continuous debate on the the topic amongst the CA whether the rule has been passed by DOT. I have CA's who vouch Inbound TO's are not liable to pay ST where else there are CA who make us pay ST as a mandatory return. Can anyone shed more light on this or give access to notice by DOT .

    ReplyDelete
  14. Is service tax to be charged on the discount given to the client?

    ReplyDelete
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    ReplyDelete
  16. Dear Sir,


    We Would like to know if there is any changed in the collection of service tax from the customer by the Air Travel Agents.

    It is come to know that the service tax is not to be collected from the customer on the sale of Air ticket and allied service but paid to the Department by the travel agent, which can be claimed from the Airline as they can adjust as the cenvat from their payment.


    Please guide us on the above subject.

    ReplyDelete
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  18. Dear Sir,
    I am not from an accounts background. So, I do not very well understand the terms used in ervice tax rule. My simple question. Please give me a simple answer. I have sub agency from IRCTC and Yatra and they give a commission fr booking any ticket. When I issue a ticket(Flight/Train/Hote) from Yatra or IRCTC, in bothe cases they charge me service charge and service tax. Then, will I have to take service tax again, against the same ticket, while generating my invoice to my client.

    ReplyDelete
  19. Suppose

    Ticket amount = Rs.10,000.00
    Commission Rs.200 PP X 02 Pax = Rs.400.00
    Service tax on commission @ 12.36% = 49
    Total of bill = Rs.10449 (charged from client)

    Tax payable to government = Rs.49.00

    ReplyDelete
  20. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, fare collected and the commission earned along with other particulars. tour packages to spain

    ReplyDelete
  21. Please clarify my doubt :-

    Air Travel Agent service

    If we book 100 air tickets from large IATA Agents like Riya Travels or Akbar , what will be the bill amount :-
    1) ticket price : 5000 pp X 100 =500000
    2) Commission : 500 pp X 100 = 50000
    3) TDS on commission : 10% = 5000
    4) S Tax on Commission : ?????
    5) Discount : 200 pp X 100 = 20000
    6) Service tax on Discount : ??????

    Please guide me with relevent case laws , notifications or provisions.

    ReplyDelete
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  23. Please clear my doubt,
    Service Tax is applicable for conveyance changers and how many percentage of service tax have to raise in the Invoice.

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  24. Please clear my doubt,
    Service Tax is applicable for conveyance changers and how many percentage of service tax have to raise in the Invoice.

    ReplyDelete
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  26. Do we need to show the commission received from airline in our invoice?

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