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.

Tuesday, February 7, 2017

Service tax applicability and amendments on Tour and Travel operators - Release II


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.

I. Amendment in services of a tour operator:

Prior to 12 January 2017, tour operators, tours Operators have an option to discharge his Service tax liability as follows:
Particulars of Service
Abatement Rate
Taxable Portion
Conditions
Service of solely booking accommodation for tourist
90%
10%
1. No CENVAT credit on inputs  has been claimed

2. Bill should indicate the service charges as well as accommodation charges.
Package tour Services(planning &  arranging tours)
70%
30%
Services Other Than above two mentioned above.
70%
30%


However, w.e.f. 12 Jan. 2017, Ministry of Finance vide Notification No.4/2017-ST, tour operator services shall be allowed an abatement of 40% & Service Tax shall be payable on the balance 60%. Details are as follows:

Particulars of  Services
Abatement Rate
Taxable Portion
Conditions:
Tour Operator Services
40%
60%
1. No CENVAT Credit on input services have been availed.
2.   The invoice issued for must indicate that it is inclusive of accommodation charges as well as transportation charges required for such tour.


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.


Difference between Tour Operator & Air Travel Agent.
Tour operator plans & arranges the tour but travel agent only books the tickets & gets commission & brokerage for selling those tickets. The words plans & arranges are important & differentiates between Tour operator & Travel Agent.

II. Air Travel Agents:
(A) Change in Rate of Tax under compounding scheme for Air Travel Agent.
Earlier the Air travel Agents were liable to discharge their ST liability as follows:
S. No.
Description of Services
Prior to Amendment
Amended vide as per Notification No. 5/2015-ST Dated March 1, 2015.
1
Domestic Bookings
0.6% of Domestic Booking + SBC & KKC
0.7% of Domestic Booking + SBC & KKC
2
International Bookings
1.2% of International Booking + SBC & KKC
1.4% of International Bookings+ SBC & KKC

     (B)    Abatement system applicable to Air Travel Agents.
Prior to 1st April 2016, air travel agents were liable to discharge their Service Tax liability as follows:
Description of services
Abatement Allowed
Taxable Value
Condition for Abatement
Transportation of passenger by Air, with or without accompanied belongings
40%
60%
1.No CENVAT Credit has not been availed

However, as per Notification No. 8/2015-ST dated 1st April 2015; classification of services as well as rate of abatement has been amended.

Description of services
Abatement Allowed
Taxable Value
Conditions for Abatement

Transportation of passenger by Air, with or without accompanied belongings:

(i) Economy Class
(ii) Other Than Economy Class



No CENVAT Credit of services used for providing taxable service has been has been availed.
40%
60%
60%
40%


Summarized & Amended Provisions of Service Tax relating to Tour Operators & Air Travel Agents.

The abovementioned amendments and notifications can be summarized as follows:
S. No.
Taxable Service
Abatement
% Age
Taxable Value
Conditions
Statutory Reference
I. Tour Operators
a.
Services by a Tour Operator
40%
60%
1. No CENVAT Credit for input services & Capital goods have been claimed.

2. The bill issued for this purpose indicates that it is inclusive of all charges of accomodation as well as transportation charges required for such tour.
S. No. 1 of Notification No. 4/2017-Service Tax dated 12th January 2017.
II. Air Travel Agents
a.
Compounding Scheme
Option to pay service tax at flat rate* on ‘basic fare’ @ 0.7 % in case of domestic booking and 1.4% in case of international booking – plus SBC





NA
1. No restriction on availability 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.
* Notification No. 5/2015 dated 1st March 2015 (applicable)  

Union Budget 2016.
(applicable from 1st April 2016)

Rule 6(7) of Service Tax Rules amended b y Notification No. 5/2015-ST  dated 1March,2015
b.
Normal Abatement Method
(i) Economy Class: 60%
(ii)Other Than  Economy Class: 40%
40%

60%
1. No CENVAT Credit has been availed claimed.
S. No. 11(iii) Notification No. 8/2015 dated 1st March 2015
c.
Transportation of passenger with or without accompanied belongings by air embarking or terminating in a regional connectivity scheme airport
(iii) Transportation of passengers by Air embarking or terminating in a regional connectivity scheme airport.
10%
1. No CENVAT Credit has been availed claimed.


S. No.1 (a) Notification No. 38/2016-ST dated 30th Aug. 2016
** Option to claim CENVAT Credit: There is no explicit clarification as to whether an air travel agent providing air travel services can claim CENVAT Credit of input services availed for providing such services.
In our Opinion, it is upto Air Travel agent to decide whether to claim CENVAT Credit on input services or not, since, law is silent on this point.

Contributed by : Tanveer Alam ( CA Finalist) at Sandeep Ahuja & Co


34 comments:

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  3. Dear Sir,

    I have filed the service tax return for the period April 2016 to September 2016 and October 2016 to March 2017 with notification no. 26/2012 but it shows following errors.



    1 V2SRC11 Abatement Notification No.{ 026/2012-S.T. } and Serial No.{ 11(iii) } is not applicable to the Service { Tour operator services } and/or for the return period.
    2 V2SRC12 The Challan Number { 05102472504201753635 } for {Rs.2566/-} in H1 section does not exist and/or is not matching with the Registration Number available in the database.
    3 V2SRC12 The Challan Number { 05102472504201753632 } for {Rs.769/-} in H1 section does not exist and/or is not matching with the Registration Number available in the database.

    Please clarify and how to revise the return

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