Who is a “Tour Operator” under the Service Tax Laws?
Tour operator means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.
What is the value of taxable service provided by a tour operator?
The value of taxable service provided by a tour operator to a client is the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour.
What are the rates of service tax applicable on various services provided by a tour operator?
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S.No.
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Taxable Service
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Partial abatement/ Composition Scheme
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Conditions
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Statutory Reference
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1
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Accommodation booking service
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10% of amount charged
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1) No CENVAT Credit.
2) Invoice should be inclusive of cost of accommodation
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S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
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2
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Package tours - wherein transportation, accommodation for stay, food, tourist guide, entry to monuments and other similar services in relation to tour are provided as part of the package
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Tax is payable on 25% of gross amount charged
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1) No CENVAT credit available.
2) Bill to be inclusive of all charges for the tour.
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S. No. 11(i) of Notif. No. 26/2012-ST dt 20.6.12
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3
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Tour operator – providing services solely of arranging or booking accommodation for any person in relation to a tour.
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Tax is payable on 10% of amount charged
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1) No CENVAT credit available.
2) Bill to be inclusive of all charges for such accommodation.
3) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
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S. No. 11(ii) of Notif. No. 26/2012-ST dt 20.6.12
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4
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Tour operator – Other than abovementioned services
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Tax is payable on 40% of amount charged.
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1) No CENVAT credit available.
2) Bill to be inclusive of all charges for the tour.
3) The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.
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S. No. 11(iii) of Notif. No. 26/2012-ST dt 20.6.12
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5
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Air Travel Agent
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Option to pay service tax at flat rate on ‘basic fare’ @ 0.6% in case of domestic booking and 1.2% in case of international booking – plus E. Cess
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No restriction on availment of CENVAT credit.
Option, once exercised, will apply uniformly in respect of all the bookings of passage for travel by air made during the financial year.
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Rule 6(7) of Service Tax Rules
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Who is an Air Travel Agent? Are his services chargeable to Service Tax?
An “Air Travel Agent” is any person engaged in providing any service connected with the booking of passage for travel by air.
Any service provided or to be provided to any person, by an air travel agent in relation to booking of passage for travel by air is a taxable service.
How is the taxable value of service provided by an air travel agent to be computed? What are the specific inclusions or exclusions?
In case of air travel agent, the value of taxable service is the gross amount charged by such agent from the customer for services in relation to the booking of passage for travel by air, excluding the air fare but including the commission, if any received from airline in relation to such booking.
Thus, the value of taxable services will include the commission received by the travel agent from the airline. However, it will exclude the fare amount collected from the customer.
The air travel agents receive certain commission for domestic and international tickets from the airlines. The details of the commissions payable by the 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, fare collected and the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the airlines. This fortnightly return would be the basis for assessment of Service Tax in respect of air travel agents.
Can the air travel agent pay service tax under any composition scheme?
An option has been given to the air travel agents to pay the Service Tax under the composition scheme as follows:
· For booking domestic tickets: @ 0.6% of the basic fare
· For booking international tickets: @ 1.2% of the basic fare
The basic fare is defined as that part of the fare on which commission is payable by the airlines.
E. Cess and S. H. E. Cess @ 3% of the tax amount determined as above will be payable additionally.
Which are the specified categories of persons, providing services to whom are exempt from service tax?
Services provided to the following persons are fully exempt:
· United Nations or any such specified International Organization
· Office of a foreign diplomatic mission or consular post in India
· Personal use or for the use of family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India
What is the place of provision of passenger transportation services?
The place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey.
What does a “continuous journey” mean?
A “continuous journey” means a journey for which:-
(i) a single ticket has been issued for the entire journey; or
(ii) more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey.
What is the meaning of a stopover? Do all stopovers break a continuous journey?
“Stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued. Thus a travel on Delhi-London-New York-London-Delhi on a single ticket with a halt at London on either side, or even both, will be covered by the definition of continuous journey. However if a separate ticket is issued, say New York-Boston-New York, the same will be outside the scope of a continuous journey.
Whether service tax will apply on related fees/charges on journeys starting outside India, even if the transaction for related charges is made in India?
and
Whether service tax will apply on related fee charges on journeys starting in India, even if the transaction for related charges is made outside India?
As per Clarification given in Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012:
“According to Rule 11 of Place of Provision of Services Rules, 2012, the place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. Therefore, if place of embarkation of passenger is located within the taxable territory, service tax is leviable on the gross amount payable for such continuous journey, irrespective of where the ticket is booked and where fees/charges are collected. If the place of embarkation of a passenger on a continuous journey falls outside the taxable territory, service tax is not leviable, irrespective of where the tickets are booked and where fees/charges are collected. However, only such charge will be determined under Rule 11 of POP as are directly related to the continuous journey. The POP of other charges will be judged on their own merits.”
However, it is to be noted that as per Rule 8 of Place of Provision for Service Rules, 2012, where the service receiver and service provider are located in the taxable territory, the provision of service would be the location of service receiver irrespective of where the service is performed, delivered or consumed.
For determining “location of service” as above, if the service recipient has obtained service tax registration, it is the registered premises of the service receiver. However, if the service receiver is not registered under service tax, his location will be determined as follows:
1. Location of business establishment
2. Location of fixed establishment
3. Where services are used at more than one establishment, the establishment most directly concerned with the use of service
4. In the absence of above, the usual place of residence.
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