Tour operator

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saurabh (Querist)
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04 May 2017 Dear Experts,
while booking package , can I assume air travel booking as pure agent services and those are out of service tax ambit.

ex. I book a package of Rs 5 lakh, out of this 3 lakh is booking cost, hotel booking cost is 1lakh, Rs 50000 is local tour & sight seeing. This 5 lakh package is of inclusive service tax component as well.

My question is should i reverse calculate service tax @9% on Rs 2 lakh amount or whole amount of Rs 5 lakh.For AIr travel can i consider myself as pure agent. If pay service tax on whole amount my margin would become zero.

If it is on whole amount, there will be no margin available to me.

saurabh

saurabh (Querist)
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05 May 2017 request a speedy reply on the above issue. thanks

saurabh

saurabh (Querist)
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05 May 2017 request a speedy reply on the above issue. thanks

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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02 August 2025 Hey! Your question about whether you can treat the air travel booking as a **pure agent service** and how to calculate service tax on the tour package is a common one for tour operators.

Here’s a clear breakdown based on service tax rules (pre-GST regime):

### 1. **What is a Pure Agent?**

* A **pure agent** is someone who incurs expenses on behalf of the client but does not add any markup on those expenses.
* Under Service Tax law, if the tour operator acts as a pure agent for air travel booking (i.e., the amount is collected on behalf of the airline and no commission/markup is charged), then **service tax is not payable on that amount**.

### 2. **Conditions to qualify as Pure Agent (Rule 9 of Service Tax Rules)**

* The amount collected from the client is separately indicated in the invoice.
* The tour operator pays the service provider (airline) directly.
* The tour operator recovers only the actual amount paid by them without any markup.
* The tour operator has a documented agreement with the client regarding the amount.
* Proper supporting documents (invoices) are maintained.

### 3. **In your case:**

* Package amount = Rs. 5 lakh

* Air travel booking cost = Rs. 3 lakh
* Hotel booking cost = Rs. 1 lakh
* Local tour & sightseeing = Rs. 50,000
* You can treat the Rs. 3 lakh for air travel as pure agent service **if** you meet all the conditions mentioned above.
* The rest Rs. 2 lakh (hotel + sightseeing) is your taxable value on which service tax @ 9% should be calculated.

### 4. **So, how to calculate service tax?**

* Service tax @ 9% on Rs. 2 lakh (the portion where you are not a pure agent).
* **No service tax** on Rs. 3 lakh (air travel booking) if treated as pure agent.

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### Important:

* If you do not fulfill pure agent criteria, then service tax @ 9% will be on the **full Rs. 5 lakh**.
* Also, make sure the invoice clearly segregates the amounts.

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**Summary:**
Yes, you can consider air travel booking as pure agent services if all conditions are met and charge service tax only on Rs. 2 lakh. This will preserve your margin.

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If you want, I can help you draft the invoice format or checklist to ensure you qualify as a pure agent. Would that help?

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