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Rate of service tax on domestic air ticket (Service Tax)

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This query is : Resolved



( Author )
07 March 2009

Whatis the % of service tax to be charge on domestic air tickets


Ankit Dawar

( Expert )
07 March 2009

Service tax is not charged on domestic air tickets. Instead, it is charged on the commission earned by the Air travel agent on the commission received from the airlines excluding the amount of airfare.

Said service would be taxable under taxable category of "Air Travel Agent" and service should be in "connection" to booking of "passage" and the said passage must be for travel by air.

Further, rate is standard across all services i.e. 10.30% (inclusive of cess).

Hope that clarifies your point....

regards



CA. MITHUN KHATRY

( Expert )
07 March 2009

YOU ARE NOT SERVICE PROVIDER TO CUSTOMER, ITS AIRLINE WCHICH IS SERVICE PROVIDER TO CUSTOMER AND YOU ARE SERVICE PROVIDER TO AIRLINES.

SO DON'T CHARGE ANY SERVICE TAX FROM CLIENT.

SINCE YOU HAVE TO PAY SERVICE TAX. YOU HAVE 2 OPTIONS

1. PAY SERVICE TAX@10.30% ON COMMISSION RECEIVED FROM AIRLINES(GROSSED UP)

2. PAY SERVICE TAX @.515% ON BASIC DOMESTIC FARE ONLY.

OPTION ONCE EXCERCISED , YOU HAVE TO FOLLOW SAME FOR FULL YEAR.


Ankit Dawar

( Expert )
07 March 2009

However, I would like to correct that in the second option Mr. Mithun Khatry suggested the rate would be .618 (.6 + 3% cess) as per Rule 6 (7) of the Service tax rules, 1994.

regards


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