SERVICE TAX ON AIR TRAVEL AGENT AND SUB AGENT
This query is : Resolved
06 September 2016
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.
12 September 2016
Sir, are you buying ticket on your on account or work under commission model ?
30 June 2017
we purchase on our own account and get discount on air ticket amount from IATA agent and on such discount they also deduct TDS. under which category now we have to registered in GST ie. under Business Auxiliary servics or under Air Travel Agent services . please clarify
24 July 2025
Got it! Here's a detailed explanation for your **service tax issue on air travel agent and sub-agent commission/discount** scenario:
---
### Situation Recap:
* You are an IATA travel agent issuing tickets from your own quota, collecting and paying service tax under **Air Travel Agent** category.
* You also act as a **sub-agent** by buying tickets from another IATA agent at a discounted rate (not formally a commission or a service contract).
* Service tax department is demanding service tax (with interest) under **Business Auxiliary Service (BAS)** on the **discount/commission** received from the other agent for last 4 years.
* Your argument is that this is not a commission for promoting their business but simply a discount on tickets bought, and no formal agreement exists.
---
### Key Points and Analysis:
1. **Service Tax on Air Travel Agents:**
* Air Travel Agents (ATA) are liable to pay service tax on their **commission income** or **markup** earned on sale of airline tickets.
* The taxable service is classified under "Air Travel Agent Services" (Section 65(105)(zzzh) of Finance Act 1994).
2. **Sub-Agent Discount vs Commission:**
* If you buy tickets from another IATA agent and sell to customers, any amount you receive as a discount or commission on that ticket sale may be treated as your income.
* The tax department may consider this as **Business Auxiliary Service (BAS)** (Section 65(105)(zzb)) because you are providing a service to the main agent or acting as an intermediary.
3. **Business Auxiliary Service (BAS) Definition:**
* BAS means “support services” provided to business entities, such as promotion, marketing, or booking services.
* The department’s argument is that your commission/discount is consideration for providing booking services to the main agent, hence taxable under BAS.
4. **Your Position (Discount, Not Commission or Service):**
* You claim the amount received is just a discount on the purchase price of tickets (not a commission or payment for service).
* There is **no formal or informal service contract** with the main agent.
* TDS deducted by the main agent also indicates they consider it as commission.
5. **Legal and Practical Considerations:**
* Service tax law is substance over form. If you earn an amount for providing a service, it is taxable irrespective of label.
* Even if called a discount, if it’s linked to your role as sub-agent facilitating ticket sales, the department may view it as commission and taxable under BAS.
* If you buy tickets on your own account and resell, your markup/discount margin is your income and taxable under Air Travel Agent Service.
* If you are acting merely as an agent for the main agent, earning commission for booking services, BAS is applicable.
---
### Suggested Approach:
* **Clarify your business model:**
* If you are **buying tickets on your own account and reselling**, your income is commission/markup and should be taxed under Air Travel Agent Service.
* If you act as a **sub-agent receiving commission for providing booking services to the main agent**, then BAS is applicable.
* **Review contracts and documentation:**
* Absence of formal contract may help your case but doesn’t guarantee exemption if facts show service provision.
* **Maintain detailed records:**
* Show that the amount received is a **discount on purchase price** and you bear the risk and reward of sale.
* **Consult a tax professional for representation** during audit or appeal.
---
### Regarding GST Registration Category:
* Under GST, air travel agent services are classified under the service category related to "Transport of passengers by air" or "travel agency services".
* If you are acting as a **principal agent buying and selling tickets on your own account**, register under **Air Travel Agent services**.
* If you receive commission/discount as a sub-agent for booking services rendered to another agent, classify under **Business Auxiliary Services** or **Other services** as per GST categorization.
---
If you want, I can help draft a detailed reply letter to the department or assist with GST classification advice. Would that be helpful?
---
### Situation Recap:
* You are an IATA travel agent issuing tickets from your own quota, collecting and paying service tax under **Air Travel Agent** category.
* You also act as a **sub-agent** by buying tickets from another IATA agent at a discounted rate (not formally a commission or a service contract).
* Service tax department is demanding service tax (with interest) under **Business Auxiliary Service (BAS)** on the **discount/commission** received from the other agent for last 4 years.
* Your argument is that this is not a commission for promoting their business but simply a discount on tickets bought, and no formal agreement exists.
---
### Key Points and Analysis:
1. **Service Tax on Air Travel Agents:**
* Air Travel Agents (ATA) are liable to pay service tax on their **commission income** or **markup** earned on sale of airline tickets.
* The taxable service is classified under "Air Travel Agent Services" (Section 65(105)(zzzh) of Finance Act 1994).
2. **Sub-Agent Discount vs Commission:**
* If you buy tickets from another IATA agent and sell to customers, any amount you receive as a discount or commission on that ticket sale may be treated as your income.
* The tax department may consider this as **Business Auxiliary Service (BAS)** (Section 65(105)(zzb)) because you are providing a service to the main agent or acting as an intermediary.
3. **Business Auxiliary Service (BAS) Definition:**
* BAS means “support services” provided to business entities, such as promotion, marketing, or booking services.
* The department’s argument is that your commission/discount is consideration for providing booking services to the main agent, hence taxable under BAS.
4. **Your Position (Discount, Not Commission or Service):**
* You claim the amount received is just a discount on the purchase price of tickets (not a commission or payment for service).
* There is **no formal or informal service contract** with the main agent.
* TDS deducted by the main agent also indicates they consider it as commission.
5. **Legal and Practical Considerations:**
* Service tax law is substance over form. If you earn an amount for providing a service, it is taxable irrespective of label.
* Even if called a discount, if it’s linked to your role as sub-agent facilitating ticket sales, the department may view it as commission and taxable under BAS.
* If you buy tickets on your own account and resell, your markup/discount margin is your income and taxable under Air Travel Agent Service.
* If you are acting merely as an agent for the main agent, earning commission for booking services, BAS is applicable.
---
### Suggested Approach:
* **Clarify your business model:**
* If you are **buying tickets on your own account and reselling**, your income is commission/markup and should be taxed under Air Travel Agent Service.
* If you act as a **sub-agent receiving commission for providing booking services to the main agent**, then BAS is applicable.
* **Review contracts and documentation:**
* Absence of formal contract may help your case but doesn’t guarantee exemption if facts show service provision.
* **Maintain detailed records:**
* Show that the amount received is a **discount on purchase price** and you bear the risk and reward of sale.
* **Consult a tax professional for representation** during audit or appeal.
---
### Regarding GST Registration Category:
* Under GST, air travel agent services are classified under the service category related to "Transport of passengers by air" or "travel agency services".
* If you are acting as a **principal agent buying and selling tickets on your own account**, register under **Air Travel Agent services**.
* If you receive commission/discount as a sub-agent for booking services rendered to another agent, classify under **Business Auxiliary Services** or **Other services** as per GST categorization.
---
If you want, I can help draft a detailed reply letter to the department or assist with GST classification advice. Would that be helpful?
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