Following are the brief notes on above matter:
1. Service tax on tickets
Type of Service:
Hon'able CESTAT West Zonal Mumbai held in case of CCE Goa Vs Zuari Travel Corporation that sub agent of an IATA agent (Main Air travel agent) is nothing but also an air travel agent and his services shall be qualify as Air travel agent and not under business auxiliary service.
Therefore, Service of air ticket booking by SUB AGENT through other agent can be qualify as air travel agent.
In addition to above there was a circular of CBEC at relevant time, wherein, it was clarified that sub agent/sub-sub agent of IATA agents are not required to collect service tax and get registration from service tax authorities under the " Air Travel Agent Services".
The matter at that time was different but the clarification treat sub agents also as air travel agents.
C. NO. CE/20/ST/Air travel/97 dated 27-8-1997
Discharging Service tax Liability:
There are two methods of discharging the service tax liability by an air travel agent.
Firstly, the normal manner i.e. pay service tax on the commission value. Secondly, pay service tax under rule 6(7) which provides the following :
The person Liable for paying the service tax in relation to the services of booking of tickets for travel by air provided by an air travel agent, shall have the option, to pay an amount calculated at the rate of 0.7 percent of the basic fare in the case of domestic bookings, and at the rate of 1.4 percent of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter, as the case may be, towards the discharge of his service tax liability instead of paying service tax at the rate ofspecified in section 66B of Chapter V of the Act and the option, once exercised, shall apply uniformly i respect of all bookings of passage fro travel by air made by him and shall not be changed during a financial year under any circumstances.
Means that part of the air fare on which commission is normally paid to the air travel agent by the airline.
How to discharge SBC and KKC as above liability is only towards service tax under section 66B:
In terms of rule 6 (7D) and 6(7E) the liability shall be determined using the following formula:
Total Service tax liability for the period X Effective rate of SBC or KKC / Effective rate of service tax.
Adjustment of Input Credit against the output liability under this scheme :
There is no restriction under CCR Rule 2004 to avail Input against output liability using rule 6(7) . Therefore, liability can be adjusted against the output tax.