Question on Service Tax for Air Travel Agent and Tour Operator

Good Evening Sir/Madam
I have a query regarding the service Tax..I have a Two service Tax Codes 1) Air Travel Agent and 2) Tour Operator service. Now my query is that
Example: Mr. 'X' had booked Air ticket with us from Mumbai - Delhi 15 Days before Travel date for Rs. 3000/- approx and paid immediately, he called me 2 days before Travel Date and asked us to Book the Accommodation and both ways Airport transfers by Cab in Delhi and it cost approximately Rs. 4000/- in total.
Now my query is..
1) What is the Taxable portion of this Booking and How much of Service Tax should i collect from the client?
2) As i have both Service Tax Codes, we have to file returns separately? or Air ticket should include in the Tour Package? (i.e Rs. 3000/- + Rs. 4000/- = Total: Rs. 7000/-)
3) If I include Air Ticket in the Tour Package then service Tax will be discharged on gross Amount of Air ticket i.e Rs.3000/- (Gross Amount of Air ticket is inclusive of Service Tax charged by the Airlines)
4) Or can we discharge Service Tax separately i.e 0.70% on Basic fare for Air Ticket and 4.5% on Gross Amount for Tour Package i.e Rs. 4000/- approx, because we did not collected any service Tax while booking the Air Ticket and Transaction dates are not same

Please kindly clarify my query it will be very much helpful to us

Thanks in Advance

Regards
Lukesh

Asked 8 years ago in Business Law

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4 Answers

You will be having a set of guidelines giving the details of the service taxes as applicable and deductible at the rates as applicable for various services.

If the package covers the air travel, room booking and conveyance, then the service tax charged may be at uniform rate, but if you charge separately for each service, you may safely deduct the taxes as per provisions of law individually on the bills generated.

This depends on the practical situation, hence you may refer to previous deductions which my be available in the files for further guidance.

T Kalaiselvan

Advocate, Vellore

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1) the value of taxable service for tour operator is gross amount charged by him from customer in relation to tour and includes accommodation charges, food and any related facilities provided by him with regards to tour package.

2) in your case service tax would be on Rs 4000 charged for organising aqaccomodation , airport transfers

3) Air travel agent’s service is taxable service. He is required to charge service tax on bill

4) Taxable value of services for air travel agent is amount charged in bill excluding air fare but including commission received by air travel agent in relation to the booking

5) as per CBEC Circular No. 80/10/2004 ST dt. 17.09.2004 ) . air fare should not be included while calculating service tax.

6) for air travel agent for Domestic booking service tax is : 0.70% of basic fare

Ajay Sethi

Advocate, Mumbai

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Respected Sir
Thank you very much for the clarification. In my case we have raised Invoice of Rs.3000/- towards Air ticket and Rs. 4000/- towards Tour Package and Total Invoice Amount is Rs. 7000/- issued to the Client.
Coming to Service Tax part..we have discharged Service Tax @ 0.70% on Basic fare for Air ticket and 3.5% Service Tax (Earlier in 2015) on Tour Package..

1) We did not collected any service Tax from the Client for Air Ticket booking, and we had discharged Service Tax @ 0.70% on Basic Fare (Composition scheme), not on Our commission received.
2) Later for Second transaction i.e for Tour Package we have collected 3.5% Service Tax on Rs. 4000/- and same been discharged to Service Tax.

Now Officials of Service Tax department has raised a query: i.e
1) The Air ticket issued is also a part of the Tour Package (Irrespective of Transaction Dates) so we have to Discharge Service Tax on Total Invoice i.e on Rs. 7000/- @ 3.5%.

We did not know (predict) that Client will book the Tour Package at the time of Air Ticket booking. Later after 10 days he asked us to book the Accommodation and Airport transfers, in that case how can we ask the Client to pay Service Tax on Air Ticket also which transaction was completed 10 days before, in that case we may loose our Business and client will book the accommodation and transfers with some other Tour Operator who will charge only on Tour Package..!!

Please kindly help us in this matter and how to come out of this issue. Please provide any circular no/Notification no which is relavant to this issue

Asked 8 years ago

1) you must submit detailed reply to service tax department

2) deny your liability to pay service tax on total package @3.5%

3) mention that customer had only booked air tickets on X date . as such service tax was charged based on commission to received by you in relation to the booking

4) for second booking done on subsequent date for Rs 4000 you have recovered 3.5%service tax on the tour package

5) contact a local CA

Ajay Sethi

Advocate, Mumbai

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If you do not want to lose your client as well as business and also have to answer the government machinery with the taxes issue, you may have to bear the losses for this case out of your pocket or profit.

Te given situation do not require any argument with the authorities because it is very clear from the rules that you have to pay the service tax as applicable and there is no question of denial of the same at any stage.

Or you should not have combined two different services under one umbrella.

You are a better judge of the situation hence decide wisely instead of looking only for legal solutions to this.

T Kalaiselvan

Advocate, Vellore

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