AIR TRAVEL AGENTS
Date of Introduction: 01.07.1997 vide Notification No.19/97-ST dt.26.06.1997.
Air Travel Agent means any person engaged in providing any service connected with the booking of passage for travel by air. (Section 65(4) of Finance Act, 1994 as amended)
Taxable event & Scope of service:
Taxable service means any service provided to a customer by an Air Travel Agent in relation to the booking of passage for travel by air.
(Section 65 (72) (l) of Finance Act, 1994 as amended)
Air Travel Agent issuing air tickets against international credit cards is required to pay service tax irrespective of the fact that the receiver of the service, i.e. international credit card holder is an Indian or NRI or foreigner.
Value of Taxable service:
Value of taxable service shall be gross amount charged by the service provider for such service rendered by him and includes the commission received by the Air Travel Agent from the Air Line.
(Section 67 of Finance Act, 1994 as amended)
As regards the services rendered by the air travel agents, the person responsible for collecting the Service Tax will be the air travel agents and the measure of the tax is the commission received by the air travel agent from the air lines for booking of air tickets.
It is understood that the air travel agents receives certain commission for domestic tickets and for international tickets from the airlines. The details of the commissions payable by any 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, the fare collected, the commission earned along with other particulars. After adjusting the commission, be remits the balance amount to the airlines. This fortnightly return could be made the basis for assessment of Service Tax in respect of air travel agents.
However, an option is also being provided to the air travel agent to pay the Service Tax at the rate of 0.25% of the basic fare in the case of domestic tickets and 0.5% of the basic fare in the case of international tickets towards discharge of his Service Tax liability instead of paying tax the tax at the rate of 5% on the actual commission received from the air lines (Notification No.20/97-ST refers). Basic fare is defined as that part of the fare on which commission is payable by the airlines. It is reported that this normality does not include the passenger service fee and the taxes. However, this aspect may be verified by the Commissioners and action taken accordingly.
Cancellation or modification of tickets is a very common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the Service Tax is paid on the net commission received, the question of separately claiming refund of Service Tax may not arise. However, care may be taken to ensure that no adjustment of commission for the period prior to 1st July, 1997 (when no Service Tax was leviable) is done from the commission payable from 1st July, 1997 onwards leading to escapement of Service Tax on the services rendered from 1st July.
(Authority F.No.43/3/97-TRU dt. 26.01.1997)
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1. The service provided by an Air Travel Agent in relation to the booking of passage for travel by air to UN and other international organizations as well as the certain specified Diplomatic Missions are exempted from payment of Service Tax.
(Notification No.51/98-ST dt.15.06.1998 & 48/98-ST dt.24.04.1998)