Service tax for air travel agents and tour operators ?

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Renjith Sreekumar

33 Points Posted on 25 May 2016

Dear Sir,

I am running a small travel agency which deal with air tickets and holiday packages. I am quote clear with the abatements and tax rates. But here are few consuing queries for me.

1. For air ticketing. We act as a subagent. We issue tickets via portal of air travel agent akbar travels and they give invoice for net amount payable to them. We add a small mark up and sell the same to customer. Is it fine that we charge the service tax for the comission we add to the ticket price ? It is what the air travel company staff told us.

2. We arrange holidays via holiday suppliers in indian and abroad. Our suppliers already add the service tax of 3.63% to holiday packages. So should we again add another 3.63% to it ? It will be double taxation and the customer will have to bear it. Our profit margin will also be less. Please advise what to do in this case ?

Replies (4)

CA PRAMOD SARAOGI

Chartered Accountant

961 Points Posted on 26 May 2016

So far as Air ticketing is concerned you are earning Commission from M/s Akbar Travels and your customers as well.Commission in the form of Mark up Price is liable to Service Tax. Moreover, the amount of commission deducted by you from the Air Ticket is also liable to Service Tax. Rule 6(1) (iv) of ST (DETERMINATION OF VALUE) RULES, 2006 specifically provides that "the commission received by the air travel agent from the airline must be included from the Value of Taxable Services. Rule 6(2) (ii) of Valuation Rules suggests to exclude the airfare collected by air travel agent from the Value of Taxable Services.

CA PRAMOD SARAOGI

Chartered Accountant

961 Points Posted on 26 May 2016

So far as your second quesry is concerned you need to pay Service Tax on the Services provided by you as a Sub-Agent. However, you may avail the Cenvat Credit of the Services Tax paid by you to the Main Agent.

Renjith Sreekumar

33 Points Posted on 26 May 2016

Dear Sir,

I would like to know on how to claim the cenvat credit ?

CA Vipul Aggarwal

Chartered Accountant

234 Points Posted on 30 December 2016

Also I would further like to raise some queries like what would be the gross amount charged for tour operators? Is it the amount collected from customer or the mark up added by tour operator? What would be the service tax liabiltiy in case service provider wants to claim SSP Exemption and still in purview of this exemption?