PPRREESSEENNTTAATTIIOONN OONN

SERVICE TAX ON TOUR OPERATORS – UPDATE

By S.C. KAMRA, Advocate

on 23.01.2017

AT THE ASHOK HOTEL NEW DELHI

(1)

LEVY OF SERVICE TAX ON TOUR OPERATORS

1. First levy …………w.e.f. 01.09.1997

2. Levy discontinued ….18.07.1998 to

31.03.2000

3. Levy re-introduced ……..w.e.f. 01.04.2000

4. TOUR OPERATOR - DEF.

4.1 Peron engaged in - Planning

the business of - Scheduling

- Organizing

- Arranging

tours by any

mode of

transport .

4.2 Tour operator may arrange for

- Accommodation;

- Transportation;

- Sightseeing; or

- Other similar services.

.3 Mode of Transport for conducting tour

- By air, or

- By rail, or

- By surface transport, or

- By river / waterways, or

- By mixed mode.

4.4 For service tax law, it is not necessary for

Tour Operator to conduct tour by a tourist

vehicle covered by valid permit.

5. PACKAGE TOUR:-

5.1 Services provided as part of package tour:

Transportation ;

Accommodation ;

Food ;

Tourist guide ;

Monuments entry; and

Other similar services.

5.2 Concept / Definition of package tour in

Service Tax Law - remained upto

31.03.2016

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(2)

SERVICE TAX PAYMENT ON ABATED VALUE

1. Service tax is not payable on full amount

charged from the client. The Govt. intends

to collect service tax on service portion

alone.

2. Abatements are provided to determine

service portion as thumb rule. Service tax

is payable on the abated value (taxable

value) as under:-

(Upto 21.01.2017)

Sr. No.

Service Category

% abatement available from gross bill

Abated value (Taxable Value)

Rate of normal S.T. (incl. SBC & KKC)

Effective rate of S.T.

1. Package Tour

70% 30% 15% 4.5%

2. Arranging / booking accommodation only

90% 10% 15% 1.5%

3. Other services

70% 30% 15% 4.5%

3. Abatement are available to Tour Operator

subject to non-availment of CENVAT credit

facility w.r.t.

Input goods;

Capital goods; and

Input services

4. Input services of source tour operators

was allowed w.e.f. 01.10.2014, even if

both source tour operator and the

assessee Tour Operator pay service tax

on abated value.

5. Facility of paying service tax on abated

value by the Tour Operator is optional.

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(3)

CHANGE IN ABATEMENTS & CONDITIONS FROM

22.01.2017

1. Uniform abatement of 40% for all services

provided by a Tour Operator is now

prescribed.

2. Abated value /Taxable value will now be

60% of gross bill amount charged from the

client irrespective of service category.

3. Reference Notification No. 4/2017-ST

dated 12.01.2017 issued by MoF –

operative date is 22.01.2017.

4. Effective rate of S.T. will be 9% of gross bill

amount - for package tour, hotel room

booking and all other services.

5. Attached conditions liberalized. The revised

conditions are:-

(i) CENVAT credit facility is not available

on inputs (goods) and capital goods.

(ii) There is no bar on availing service tax

credit for input services procured to

support output services of the Tour

Operator.

(iii) Invoice of the Tour Operator should

carry an endorsement / footnote to the

effect that the amount charged in the

invoice is inclusive of accommodation

and transportation charges.

6. Abatement is not available where tour

operator bills only service charges for

booking accommodation for any person and

cost of accommodation is not included in the

bill. In this case, full service tax @ 15% is

applicable on service charges.

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(4)

TRANSITIONAL

SITUATIONS - POINT OF TAXATION

Sr. Situation POT Rate of S.T.

1. Service is provided

before change in tax rate (22.01.2017)

(a) Invoice is issued before 22/01 but payment is received after 22/01

Date of invoice

4.5%

(b) Invoice is issued after 22/01 but payment is received before 22/01

Date of payment

4.5%

(c) Invoice is issued after 22/01 and payment is also received after 22/01

Date of invoice or payment date, which is earlier.

9%

2 Services is provided after change in tax rate (22.01.17)

(a) Payment is received before 22/01 and invoice is also issued before 22/01

Date of invoice or payment date, which is earlier.

4.5%

(b) Payment is received before 22/01 but invoice is issued after 22/01

Date of invoice

9%

(c ) Invoice is issued before 22/01 but payment is received after 22/01.

Date of payment

9%

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((55))

CENVAT CREDIT FACILITY FOR TOUR OPERATORS

1. A Tour Operator paying service tax on

abated value can start availing CENVAT

credit in respect of all input services.

2. Bar is applicable for input goods and capital

goods used in the business of a Tour

Operator.

3. What is an input service ?

(a) Any service

(b) used by provider of output service

(c ) for providing an output service.

Services provided by tour operator to

support performance of services in the

business are input services.

4. IMPORTANT INPUT SERVICES TO QUALIFY FOR CENVAT:-

(a) Hotel services.

(b) Rent-a-cab service for transportation.

The cab should registered in the

name of transporter in the records of

concerned transport authority.

(c) Other tour – related services such as

guide, monument entry etc.

(d) Services of Restaurant & Bar.

(e) Office rent.

(f) Telephone & Mobile phone services

(post-paid).

(g) Internet / broadband services.

(h) Services of Air Travel Agents / Rail

Travel Agents.

(i) Banking and other financial services.

(j) Advertisement and Sales promotion

services.

(k) Computer networking.

(l) AMC of computers and other office

equipments.

(m) Services of Chartered Accountants,

Audit fees etc.

(n) Legal services from Advocates.

(o) Office security services.

(p) Business Exhibition services etc.

# Above list is illustrative and not exhaustive.

5. SERVICES DISQUALIFIED:-

(a) Services involving civil construction or

works contract other than repairs and

maintenance work.

(b) Rent-a-cab services where cab is not a

capital goods for the service provider /

transporter.

(c) Services of general insurance, repair

and maintenance of motor vehicle

owned / used by the tour operator.

(d) Personal services like

- outdoor catering,

- club membership,

- life insurance,

- health insurance,

- health and fitness centre,

- LTC /HTC facility given to the

employees on vacation etc.,

When such services are used primarily

for personal use or consumption of

employees.

6. CENVAT credit is available for basic service

tax (14%) and Krishi Kalyan Cess (KCC).

No credit is available for S.B. Cess (SBC).

Admissible portion of CENVAT credit is

tabulated below:-

Sr. No.

Service Provider

Abated value

Effective rate of S.T.

Extent of credit available

1. Hotels 60% 9% 8.70%

2. Restaurant / Bar

40% 6% 5.80%

3. Banquet Hall with food facility

70% 10.5% 10.15%

4. Rent-a-cab 40% 6% 5.80%

5. Office rent 100% 15% 14.5%

6. Telephone, Mobile phones, internet etc.

100% 15% 14.5%

7. AMC of computers & office equipments (labour charges)

100% 15% 14.5%

8. CAs, Advocates & other professionals

100% 15% 14.5%

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(6)

PRECAUTIONS – CENVAT

CREDIT

1. Ensure that CENVAT credit is taken only

against proper invoice issued by service

provider on or after 22.01.2017.

2. Proper invoice should contain at least the

following details:-

(a) Running serial number with date;

(b) Name and address of service

provider;

(c) S.T. registration number of the

service provider;

(d) Name and address of the service

recipient;

(e) Complete description and value

of service provided;

(f) Service tax payable

3. Invoice should be original copy. Photocopy

or extra copy is not acceptable.

4. Take credit only after processing and

making payment to the service provider /

vendor against his invoice.

5. Do not take credit for Swachh Bharat Cess

(SBC) charged by service provider. Basic

Service Tax & K.K. Cess are cenvattable.

6. Reverse charge cases – Rent-a-cab,

Legal services, Security & Manpower

supply etc. – Service tax paid in cash

through challan – Challan is the proper

document for availing credit.

7. What happens if (a) service provider

refunds full or a portion of invoice value;

(b) issues credit note in respect of value

of service and service tax, already

received by him.

8. Take credit within one year from the date

of invoice / bill of service provider.

9. Utilize CENVAT credit balance lying on the

last day of the month against payment of

output service tax for that month.

10. Utilize K.K. Cess credit (input service)

against corresponding K.K. Cess payable

on output service only. K.K. cess cannot

be set off against basic service tax.

However, vice – versa is possible.

11. Maintain proper Account for receipt and

consumption of input services and Input

Tax Credit taken on day-to-day basis.

12. Maintain Cenvat Credit Account (Input

Service) either manually or in EXCEL

sheet or in the business / accounting

software in use. A suggested format of

CENVAT Credit Account is enclosed.

13. Disclose the Input Service Tax Credit

taken in each month in ST-3 returns filed

with S.T. Department at ACES site.

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THANKS