Service tax for tour operators

Hi All,

I'm a tour operator in Pune and provide tour packages for domestic and international both. I deal with hotel directly as well as many times i take the entire tour pkg from another tour partner. I want to understand how the service tax will work here. below is a small example:
Here are my 2 queries:

1) I take a tour pkg from tour partner @ Rs 100 & he chargers service tax of 3.5%. So ideally i pay him Rs 103.5/- Where as i forward the same pkg @ Rs 110/- and charge service tax of 3.5% on Rs 110 = Rs 113.85/-

now i want to understand here what service tax should i pay to govt. Will it be Rs 3.85 or will be 3.85 - 3.5 = 0.35

2 ) If I book tour (hotel + Traveling ) for a customer both the hotel and cab owner charges me service tax separately as per their rate where as I charge customer 3.5% on entire pkg. So in this scenario what service tax should i ideally pay to govt.

Service Tax that you charge on Invoice (Service Tax Output) is to be adjusted with Service tax that you paid on services (Service Tax Input) that you availed for providing Tour Services and balance amount will be deposited with govt.

Ex ST Output Rs 1120, ST Input Rs 1000. Service Tax Payable Rs 120.

You can also get abatement from tax paid i.e. paying lesser tax and in that case you cant adjust Service Tax Input to certain extent.

Ex Services provided by you Rs 1 Lac Service Tax is 10%, ST Input Rs 5000 and you get abatement of 75% so Service Tax Payable will be (Rs 1Lac X 10% X 25%)=2500 but in this scenario you cant adjust ST Input

Though above examples are very crude, there are many complex provisions in service tax, warrenting good knowledge so I suggest you hire Professional for one time study of Service Tax applicabilty to your case and select the option which suits you better

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Anup A Deshpande

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