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.
I. Amendment in
services of a tour operator:
Prior to 12 January 2017, tour operators, tours
Operators have an option to discharge his Service tax liability as follows:
|
Particulars of Service
|
Abatement Rate
|
Taxable Portion
|
Conditions
|
|
Service of solely booking accommodation for tourist
|
90%
|
10%
|
1. No CENVAT credit on
inputs has been claimed
2. Bill should indicate
the service charges as well as accommodation charges.
|
|
Package tour Services(planning & arranging tours)
|
70%
|
30%
|
|
|
Services Other Than above two mentioned above.
|
70%
|
30%
|
However,
w.e.f. 12 Jan. 2017, Ministry of
Finance vide Notification No.4/2017-ST, tour operator services shall be
allowed an abatement of 40% & Service Tax shall be payable on the balance
60%. Details are as follows:
|
Particulars of Services
|
Abatement Rate
|
Taxable Portion
|
Conditions:
|
|
Tour
Operator Services
|
40%
|
60%
|
1. No
CENVAT Credit on input services have been availed.
2. The invoice issued for must indicate that
it is inclusive of accommodation charges as well as transportation charges
required for such tour.
|
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.
Difference between
Tour Operator & Air Travel Agent.
Tour operator
plans
& arranges the tour but travel agent only books the tickets &
gets commission & brokerage for selling those tickets. The words plans
& arranges are important & differentiates between Tour operator &
Travel Agent.
II. Air Travel Agents:
(A) Change in Rate of Tax
under compounding scheme for Air Travel Agent.
Earlier the
Air travel Agents were liable to discharge their ST liability as follows:
|
S. No.
|
Description of Services
|
Prior to Amendment
|
Amended
vide as per Notification No. 5/2015-ST Dated March 1, 2015.
|
|
1
|
Domestic
Bookings
|
0.6% of
Domestic Booking + SBC & KKC
|
0.7% of
Domestic Booking + SBC & KKC
|
|
2
|
International
Bookings
|
1.2% of
International Booking + SBC & KKC
|
1.4% of
International Bookings+ SBC & KKC
|
(B) Abatement
system applicable to Air Travel Agents.
Prior to 1st
April 2016, air travel agents were liable to discharge their Service Tax
liability as follows:
|
Description of services
|
Abatement Allowed
|
Taxable Value
|
Condition for Abatement
|
|
Transportation
of passenger by Air, with or without accompanied belongings
|
40%
|
60%
|
1.No CENVAT
Credit has not been availed
|
However, as
per Notification
No. 8/2015-ST dated 1st April 2015; classification of services as well
as rate of abatement has been amended.
|
Description of services
|
Abatement Allowed
|
Taxable Value
|
Conditions for Abatement
|
|
Transportation of passenger by
Air, with or without accompanied belongings:
(i) Economy Class
(ii) Other Than Economy Class
|
|
|
No CENVAT Credit of services used
for providing taxable service has been has been availed.
|
|
40%
|
60%
|
||
|
60%
|
40%
|
Summarized
& Amended Provisions of Service Tax relating to Tour Operators & Air
Travel Agents.
The
abovementioned amendments and notifications can be summarized as follows:
|
S.
No.
|
Taxable
Service
|
Abatement
%
Age
|
Taxable
Value
|
Conditions
|
Statutory
Reference
|
|
I. Tour Operators
|
|||||
|
a.
|
Services by a Tour Operator
|
40%
|
60%
|
1. No CENVAT Credit for input services & Capital goods
have been claimed.
2. The bill issued for this purpose indicates that it is
inclusive of all charges of accomodation as well as transportation charges
required for such tour.
|
S. No. 1 of Notification No.
4/2017-Service Tax dated 12th January 2017.
|
|
II. Air Travel Agents
|
|||||
|
a.
|
Compounding
Scheme
|
Option to pay service tax at flat rate* on ‘basic fare’ @
0.7 % in case of domestic booking and 1.4% in case of international booking –
plus SBC
|
NA
|
1. No restriction on availability
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.
|
* Notification No. 5/2015 dated
1st March 2015 (applicable)
Union Budget 2016.
(applicable
from 1st April 2016)
Rule 6(7) of Service Tax Rules
amended b y Notification No. 5/2015-ST dated 1March,2015
|
|
b.
|
Normal Abatement Method
|
(i) Economy
Class: 60%
(ii)Other
Than Economy Class: 40%
|
40%
60%
|
1. No CENVAT Credit has been
availed claimed.
|
S. No. 11(iii) Notification No.
8/2015 dated 1st March 2015
|
|
c.
|
Transportation of passenger with
or without accompanied belongings by air embarking or terminating in a
regional connectivity scheme airport
|
(iii)
Transportation of passengers by
Air embarking or terminating in a regional connectivity scheme airport.
|
10%
|
1. No CENVAT Credit has been
availed claimed.
|
S. No.1 (a) Notification No.
38/2016-ST dated 30th Aug. 2016
|
** Option to claim
CENVAT Credit: There is no explicit clarification
as to whether an air travel agent providing air travel services can claim
CENVAT Credit of input services availed for providing such services.
In our Opinion, it is upto Air
Travel agent to decide whether to claim CENVAT Credit on input services or not,
since, law is silent on this point.
Contributed
by : Tanveer Alam ( CA Finalist) at Sandeep Ahuja & Co
