Service tax on tour operators
This query is : Resolved
20 April 2017
Dear experts.
Please let me know the rates of service tax post 22 jan 2017
1) For Tour operators who sold a complete package
2) hotel booking
3) Air flight booking
Can we use input credit of services availed post 22 jan 2017 notification.
Please let me know the rates of service tax post 22 jan 2017
1) For Tour operators who sold a complete package
2) hotel booking
3) Air flight booking
Can we use input credit of services availed post 22 jan 2017 notification.
20 April 2017
1 15% service tax payable on 60% value cenvat credit available on input.
2 15% service tax payable on 60% value of hotel booking and cenvat credit available on input.
3 Air ticket booking 15% service tax payable on 0.75% value for domestic and on 1.50% value on international flights.
2 15% service tax payable on 60% value of hotel booking and cenvat credit available on input.
3 Air ticket booking 15% service tax payable on 0.75% value for domestic and on 1.50% value on international flights.
21 April 2017
Dear Sir,
Just wanted to know when we provide a package to a client, (includes hotel travel and airfare) while calculating service tax , we can exclude air fare cost as pure agent service for calculating service tax
Just wanted to know when we provide a package to a client, (includes hotel travel and airfare) while calculating service tax , we can exclude air fare cost as pure agent service for calculating service tax
24 July 2025
Great question! Here's how service tax applies to **tour operators** post 22 January 2017, specifically on package tours that include hotel, travel, and airfare:
---
### 1. **Tour Operator Service Tax Rate on Package Tours:**
* **Service tax rate:** 15% on **60% of the total value** of the package.
* This means 40% of the package value (which typically includes the cost of transportation like airfare) is **excluded** from the taxable value.
* So, the taxable value = 60% of the total package cost.
---
### 2. **Treatment of Airfare:**
* Airfare charged by the airline is generally considered a **pure agent** service.
* As per service tax rules, when the tour operator acts as a **pure agent** (recovering air fare cost without markup), the airfare can be excluded from the taxable value.
* So, **you can exclude the airfare cost while calculating service tax** on the package.
But this is valid only if:
* You have proper documentation (agreement with airlines showing pure agent role),
* The airfare is billed separately or clearly identified in the invoice.
---
### 3. **Hotel Booking:**
* If the tour operator books the hotel for the client, service tax is payable at **15% on 60% of the hotel cost**.
* Input credit is available on inputs used to provide the service.
---
### 4. **Air Flight Booking (Non-operator):**
* For just booking air tickets (without operating the flights), service tax is charged at:
* **0.75% of the domestic airfare value**.
* **1.5% of the international airfare value**.
* Input credit is available as usual.
---
### 5. **Input Credit Usage Post 22 Jan 2017:**
* You can avail CENVAT credit on inputs and input services used in providing taxable services.
* Credit is allowed proportionate to the taxable value.
* For tour operators, since only 60% of package value is taxable, input credit has to be apportioned accordingly.
---
### **Summary Table:**
| Service Type | Service Tax Rate | Taxable Value Basis | Input Credit |
| -------------------------------- | ----------------------------------- | ----------------------------------------------------- | ------------------------ |
| Tour operator (complete package) | 15% | 60% of package cost (excluding airfare if pure agent) | Available proportionally |
| Hotel booking (direct) | 15% | 60% of hotel cost | Available |
| Air ticket booking only | 0.75% domestic / 1.5% international | Full airfare value | Available |
---
If you want, I can help you draft the invoice format or assist with proper documentation to show airfare as pure agent. Would you like that?
---
### 1. **Tour Operator Service Tax Rate on Package Tours:**
* **Service tax rate:** 15% on **60% of the total value** of the package.
* This means 40% of the package value (which typically includes the cost of transportation like airfare) is **excluded** from the taxable value.
* So, the taxable value = 60% of the total package cost.
---
### 2. **Treatment of Airfare:**
* Airfare charged by the airline is generally considered a **pure agent** service.
* As per service tax rules, when the tour operator acts as a **pure agent** (recovering air fare cost without markup), the airfare can be excluded from the taxable value.
* So, **you can exclude the airfare cost while calculating service tax** on the package.
But this is valid only if:
* You have proper documentation (agreement with airlines showing pure agent role),
* The airfare is billed separately or clearly identified in the invoice.
---
### 3. **Hotel Booking:**
* If the tour operator books the hotel for the client, service tax is payable at **15% on 60% of the hotel cost**.
* Input credit is available on inputs used to provide the service.
---
### 4. **Air Flight Booking (Non-operator):**
* For just booking air tickets (without operating the flights), service tax is charged at:
* **0.75% of the domestic airfare value**.
* **1.5% of the international airfare value**.
* Input credit is available as usual.
---
### 5. **Input Credit Usage Post 22 Jan 2017:**
* You can avail CENVAT credit on inputs and input services used in providing taxable services.
* Credit is allowed proportionate to the taxable value.
* For tour operators, since only 60% of package value is taxable, input credit has to be apportioned accordingly.
---
### **Summary Table:**
| Service Type | Service Tax Rate | Taxable Value Basis | Input Credit |
| -------------------------------- | ----------------------------------- | ----------------------------------------------------- | ------------------------ |
| Tour operator (complete package) | 15% | 60% of package cost (excluding airfare if pure agent) | Available proportionally |
| Hotel booking (direct) | 15% | 60% of hotel cost | Available |
| Air ticket booking only | 0.75% domestic / 1.5% international | Full airfare value | Available |
---
If you want, I can help you draft the invoice format or assist with proper documentation to show airfare as pure agent. Would you like that?
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