Applicability of Service Tax

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Querist : Anonymous

Querist : Anonymous (Querist)

05 October 2010 Dear Experts,
Please clarify me whether Hotel and tourism related services are liable to service tax

Ajay Mishra

Ajay Mishra (Expert)
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07 October 2010 The Finance Bill (No.2), 2004 has been enacted on 10.09.2004. With the enactment of the Finance Bill, The following new services have come under the service tax levy,-

• Business exhibition services
• Airport services
• Transport of goods by air
• Survey and exploration of minerals
• Opinion poll services
• Intellectual property services (other than copyrights)
• Forward contract services
• Pandal or shamiana services
• Outdoor catering services
• TV and radio programme production services
• Construction services (commercial and industrial buildings or civil structures)
• Travel agents (other than air/rail travel agents)
• The following taxable services get expanded to include,-
• Commission and installation service to include erection service
• Stock brokers to include sub-brokers
• Cable operators to include multi system operators
• Business auxiliary service to include activities relating to procurement of inputs, production of goods (not amounting to manufacture) or provision of services on behalf of a client.

• Financial services to include some more specified financial services. Such services provided by non-banking financial company, body corporate or any other commercial concern are also being subjected to service tax.

• Tour operators to include such package tour operators who organize tours involving different modes of transport.

• The risk cover in life insurance becomes subject to levy of service tax.

The rate of service tax on all taxable services, including the new and expanded services becomes 10%.

The education Cess of 2% of the service tax would be leviable on taxable services.

Ajay Mishra

Ajay Mishra (Expert)
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07 October 2010 Hi

Tour operator services
Services of booking tickets on behalf of principal tour operator was brought within the ambit of service tax only w.e.f. 10-9-04. Accordingly for the period prior thereto no service tax would be payable under the category of Tour operator services [CCE vs. Kalpana Travels Pvt. Ltd. (2009) 16 STR 444 (Tri-Del)]
Where the appellants used its buses for transportation of its employees the Tribunal on facts held that appellants would not be liable for service tax under the category of Tour Operator service since:
• The appellants were not engaged in the business of operating tours;
• The vehicles used for transportation of employees is not a tourist vehicle
• The vehicles do not have a permit under the Motor Vehicles Act to conduct tourism business.
[Prakash & Poonam Tours & Travels vs. CCE (2009) 16 STR 452 (Tri-Del)]

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