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Service tax on tour operator

Durai (Article) (34 Points)

02 September 2012

Hi please help, one of our client (Say M/s. XYZ)engaged in tour operator service but there nature of service is purely for outbound tours i.e Indian customers book a tour through them(M/s. XYZ) to Maldives(foreign country).

Further invoices are raised in INR and also in Dollars. As per Board Circular the Board’s Circular F.No. B.43/10/97 – TRU, dated 22-8-1997 in Para 3.6 confirms that no service tax on outbound tours.

Thus, please clarify after 1-7-2012 under new service tax law what would be the position, whether service tax applicable and if so at what rate?????

Thank you

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2 Replies

Shridhar Shah (Chartered Accountant in Practice) (172 Points)
Replied 03 September 2012

Please refer Notification No. 26/2012- Service Tax

Check Sl 11.

Services by a tour operator in relation to,-

(i) a package tour

(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) The bill issued for this purpose indicates that it is inclusive of charges for such a tour.

(ii) a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour

(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation.

(iii) 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.

(iii) any services other than specified at (i) and (ii) above.

(i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii)The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour.

Also refer Notification No. 28/2012 - Service Tax for Place of Provision of Service to find the taxability of service.

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Unmesh (Consultant) (83 Points)
Replied 04 September 2012

Given case may have many situations explained hereunder:

Situation1: If tour includes providing flight ticket from India, then as per Rule 7 of new POP rules, place of provision for outbound tour will be taxable territory, hence taxable in India even if it is provided to any person who’s is located in non-taxable territory

Situation2: if tour does not includes providing flight ticket from India, and all the services provided will be performed in non taxable territory then we have to see location of service receiver as per clause (i) of Rule 2 of the POP rules,2012, if location of service receiver is taxable territory then it will be considered as provided in taxable territory as per rule 8 & 14 of POP rules.

Situation3: if in situation 2 location of service receiver is non-taxable territory as per clause (i) of rule 2 of the POP rules,2012, then place of provision will be non taxable (Rule 7 & 3) hence non taxable as per section 66B of the act.

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