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service tax on air travel sub agent

Smehta (CA Practice ) (85 Points)

17 July 2007

A proprietor is engaged in the booking of the foll:
1)Buying air tickets from authorised IATA agents at discount and selling such tickets to his clients.The IATA agent charges ser.tax on basic fare to proprietor.
IATA agent does not give any commission to prop. except discount on air tickets.The proprietor levies ser.tax and service charges of rs.200/- per ticket when he bills to his small client.
Query:on what amt. is sub agent liable to ser.tax?
Does he has to pay ser.tax charged and collected from his clients?
Does he has to pay ser.tax on service charges of rs. 200/-collected from his client?
2)In the same way he books hotel rooms for his clients from Hotel owners directly or auth. agents.He charges his clients same way as he does in air ticket booking.What is his liability in sert.tax?

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13 Replies

udaykumar (artical sheep) (38 Points)
Replied 05 December 2008

Originally posted by :Smehta
"	A proprietor is engaged in the booking of the foll:1)Buying air tickets from authorised IATA agents at discount and selling such tickets to his clients.The IATA agent charges ser.tax on basic fare to proprietor.IATA agent does not give any commission to prop. except discount on air tickets.The proprietor levies ser.tax and service charges of rs.200/- per ticket when he bills to his small client.Query:on what amt. is sub agent liable to ser.tax?Does he has to pay ser.tax charged and collected from his clients?Does he has to pay ser.tax on service charges of rs. 200/-collected from his client?2)In the same way he books hotel rooms for his clients from Hotel owners directly or auth. agents.He charges his clients same way as he does in air ticket booking.What is his liability in sert.tax?	"

S. Banerjee (Practising Cost Accountant. Core area- Central Excise. Service Tax Costing system installation including maintenance of Cost Records and Cost Audit and Management Audit mainly Revenue leakages Audit) (622 Points)
Replied 07 December 2008

"Air Travel Agent" excludes - other agents who buy ticket from other air travel agents as they have no authority to issue tickets directly.

An ari travel agent may purchse the ticket on behalf of of his customer from a registered IATA Agent. The agent so purchasing a ticket becomes the sub-agent of IATA registered agent and receives commission only from the IATA registered agent and not from the airlines. Only the IATA agent will receive the commission from the airlines. Hence, the commission received by the sub-agent from the IATA registered agent is not liable to service tax as an Air Travel Agents Services.

Hope this is clear to you,

Thanks,

S. Banerjee

AK Venkatesh (CA Final cleared) (78 Points)
Replied 02 March 2009

If he is not liable for service tax under Air travel agents service,then under which category will he be liable to pay service tax?

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 02 March 2009

Regarding Air tickets or hotel rooms, if it can be argued that it is a transaction in goods, no service tax is payable.

Say air tickets- he is buying on discount and selling it. Rs. 200 is his profit by whatever name it is called.

Regarding Hotels- if he gets commission from hotel owners, it is a taxable service; but if he trade in hotel rooms, i.e. booking for a client and charging extra fee from client, it may not be taxable. Under Sale of Goods Act, Air ticket & hotel rooms are tradable goods. If somebody is trading in that, he is not liable to service tax.

#These are just loud thinking on my part. A thinking that service tax cannot be levied on sale of goods. As per the Constitutional scheme of things, only state government is entitled to impose tax on sale of goods. Any interpretation of Service Tax laws, which imposes tax on sale of goods are unconstitutional ald liable to be set aside.

PANJU (ACCOUNTANT) (22 Points)
Replied 18 April 2009

Though we are iata agents we issue some of the tickets through consolidator (big IATA agents). For those tickets our consolidator make Service Tax payment to ST department as they directly deal with airlines/GSA directly.

Whatever tickets we issue directly from Airlines/BSP we will collect & remit Service Tax.

Pls let me know how I should show in ST-3 (Half yearly returns) the sales done through consolidators as it will not attact service Tax from my end.

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 20 April 2009

Disclosure in the ST-3 of transaction reflected in the financial records is recommended. Otherwsie the reconciliation between that and the returns would be advisable.

HLRatan (CEO) (23 Points)
Replied 25 April 2009

Originally posted by :Rajesh Kumar
"	Regarding Air tickets or hotel rooms, if it can be argued that it is a transaction in goods, no service tax is payable. Say air tickets- he is buying on discount and selling it. Rs. 200 is his profit by whatever name it is called. Regarding Hotels- if he gets commission from hotel owners, it is a taxable service; but if he trade in hotel rooms, i.e. booking for a client and charging extra fee from client, it may not be taxable. Under Sale of Goods Act, Air ticket & hotel rooms are tradable goods. If somebody is trading in that, he is not liable to service tax. #These are just loud thinking on my part. A thinking that service tax cannot be levied on sale of goods. As per the Constitutional scheme of things, only state government is entitled to impose tax on sale of goods. Any interpretation of Service Tax laws, which imposes tax on sale of goods are unconstitutional ald liable to be set aside.	"

In my understdnaing the sub agent will have to pay service tax under BAX or Business Auxiliary Services

Salil Patel (Proprietor) (22 Points)
Replied 29 December 2009

I am a IATA travel agent. I issue tickets from my own IATA quota, collect service tax and remit to the reveune authority under AIR TRAVEL AGENT category. I also issue tickets from another IATA agent in which case I become a subagent since they pass more discount than I would normally get if issued the ticket directly from the airline from our quota. The main agent levies applicable service tax on the purchase bills to us and we sell them to our ciients. There is a demand by the service tax dept after the completion of service tax audit of our travel agent to pay service tax under the BAS business auxillary service for the last 4 years with interest on commission recieved from other travel agent on tickets purchased from them as a sub agent. They have mentioned that the service of booking is taxable and not the service of passage and hence the commission recieved by us as a sub agent is taxable as we are promoting thier business like a service of Business Auxillary service under section 65(105)(ZZB) of finance act 1994. Our clarification to them is that we are not promoting the business of the agent from where we are buying tickets, we are merely recieving a discount from them on tickets and not commission and there is not formal or informal agreement between us. Kindly advise us correctly.

anil chaudhari (Accountant) (21 Points)
Replied 12 February 2010

am a Sub agent buying tickets from holesaler and i am getting a commission. We are charging Rs 100 service charges to the customer. Can you pls let us know on what amount i have to pay service tax (on commission + Service charges or on Service charges only as we are paying service tax to wholesaler.

Second thing what is the criteria to get registration of service tax. i.e. persons whose commission in a month is Rs.5000 he is also elegiable for registration or what

Venkat M (FCA) (133 Points)
Replied 16 February 2010

Dear Mr.Anil,

Service providers whose turnover does not cross Rs.9 lakhs p.a need not apply for registration under Service tax.

Venkat M (FCA) (133 Points)
Replied 16 February 2010

Dear Mr.Salil,
Earlier , sub-agents were not liable to pay service tax (Refer CCE,New Delhi letter dt.27.8.97-97 ELT T7). Now this circular is not valid and even subagents are covered under service taxnet. By the way,the definition as per Section 65(4) does not exclude services of sub-agent. It says Air travel agent means any person engaged in providing any service connected with the booking of passage for travel by air."

GHANSHYAM DAS MITTAL (CA Article) (44 Points)
Replied 26 January 2012

Dear Mr. Venkat M:

Please clarify.....

If the earlier said notification is no valid now............are the sub agents liable to pay service tax.

If yes at what rate and what amount ?

NNotification or circular if any which nullify the above said notification.

Regards

Junaid Khan (2 Points)
Replied 03 November 2023

Service tax on <a target='_blank' rel='nofollow' href="https://airblueflight.pk/">air travel</a> sub-agents refers to the tax levied on individuals or entities that provide intermediary services related to airline bookings and ticketing. These sub-agents play a crucial role in facilitating air travel arrangements for passengers. The service tax is typically imposed on the commission or service fees earned by these sub-agents for their services. It is a form of indirect tax that contributes to government revenue and is subject to specific regulations and rates determined by the tax authorities in each jurisdiction.