Indian Service Tax
Tour Operator*
Effective Date
01/04/2000
Authority
Notification No. 52/98-ST, dt. 18/07/1998 (See at the end of this Chapter).
Rate of Service Tax
8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Definition:"tour" means a journey from one place to another irrespective of the distance between such places; [Section 65 (113)]
"tourist vehicle" has the meaning assigned to it in clause (43) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (114)]
"tour operator" means any person engaged in the business of operating tours in a tourist vehicle covered by a permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder; [Section 65 (115)]
Taxable Service
Tour service by a tour operator to any person.
Value of Taxable Service
Gross amount charged by tour operator from the client for services in relation to a tour including charges for any accommodation, food or any other facilities provided in relation to such tour.
Exemptions
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State Roadways Corporations
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60% abatement on package tour
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60% abatement if services are soley for booking or arranging accomodation, teansporation–Notfn. No. 2/2004 ST, dt. 5/2/2004
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Foreign tour
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Bokking agents
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Religious/Education institutes organisation tours
Person Liable to Pay
Tour operator.
Head of Account
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Question & Answers
Q. Who is a Tour Operator ?
Ans. A Tour Operator means any person engaged in the business of operating tours in a torist vehicle covered by a permit granted under the Motor Vechicles Act, 1958 or the Rules made thereunder.
The above new definition was notified w.e.f. 16/10/98. Prior to the amendment, only the tour operators who were operating tourist vehicles, with permit and which were owned by them, were covered under the ambit of Service Tax. However, with the change, even 'non permit holders' who operate as tour operators by using tourist vehicles, which may have been leased or hired from persons who hold tourist permits, are also covered under the definition of tour operator and are liable to pay Service Tax.
Q. What is the taxable service provided by a Tour Operator?
Ans. Taxable service means the service provided to any person, by a tour operator in relation to a tour.
Q. What is the value of taxable service provided by a tour operator?
Ans. 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.
Q. Are the services provided by Tour Operators exempted from payment of Service Tax?
Ans. The services provided by Tour Operators were exempted from payment of Service Tax upto 31/03/2000 by virtue of Notfn.No.52/98-ST. dt. 18/07/1998. However, since this notification has not been renewed; the services of tour operators have again become liable to Service Tax w.e.f.01/04/2000.
Changes from 10/9/2004
Date: 10/9/2004
F.No. B2/8/2004-TRU
Extension of tour operator service to package tour operators using different modes of transport:
At present, tour operator service covers package tour operators also. However, under the present definition, such package tours attract service tax only if such tours involve modes of transport other than road (say a combination of air-rail-cab travel). The definition of tour operator has been suitably expanded. While the exil)ting levy on tour operators engaged in operating tours in tourist vehicles remains as such, in case of a package tour (which are planned, scheduled, organized or arranged by tour operators), the scope of the levy is being extended by removing the limitation regarding transportation by tourist vehicles only. Such tourist operators would be subjected to service tax irrespective of the mode of transport used during such tours. The abatements (Notification N0. 39/ 97-S.T.) in case of package tour operators (providing transportation and accommodation) would remain at 60%.
Main text of Departmental Circular/TN
[TN No. 1/2000, dated 27/4/2000 of the Pune Commissionerate)
The definition of "Tour Operators" is provided in Section 65(52)* of the Finance Act, 1994. "Tour" means a journey from one place to another irrespective of the distance between such places and the "taxable service" means any service provided to any person by a tour operator in relation to a tour. The rate of service tax is 5% and the value of taxable service in relation to the service provided by a tour operator to a client, shall be 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.
The revised definition provides that any person engaged in the business of operating tours in a tourist vehicle, covered by a permit granted under the Motor Vehicle Act, 1988 or Rules made thereunder, would be treated as a Tour Operator. Consequently, 'non-permit holders', who operate as Tour Operator by using vehicle which may have been leased or hired from persons who hold tourist permit, are also covered under the definition of a Tour Operator and are liable to pay Service Tax.
As per rule 82 of the Central Motor Vehicle Rules, 1989 a tourist permit is granted only for a 'tourist vehicle'. As per the Motor Vehicle Act, Section 2 (43) a tourist vehicle means a contract carriage constructed or adapted and equipped and maintained in accordance with such specifications as may be prescribed. The term 'tour operators' covers any person who holds a tourist permit in respect of any vehicle. The service tax on tour operators is on operators who run/operate a tour on motor vehicle provided that the tour operator holds a tourist pemit under the Motor Vehicles Act, 1988 in respect of any motor vehicle. Service Tax will be chargeable on all domestic and in bound tourist services provided by a tour operator holding a tourist permit. Service Tax will also be chargeable on journeys/tours undertaken by tourist taxis and tourist business (which also hold tourist permits) within and outside the State where they have been registered as tourist vehicles.
The tour operator can be all self-employed, single vehicle owner individual or a well organized firm providing a vast range of professional services in the field of tourism whether organized as a sole proprietorship, partnership, a private or a public limited company. Even public sector undertakings operating tours such as Indian Tourism Development Corporation etc. are covered under this levy. However, State Roadways Corporations who fly the passengers in the neighbouring State will not be covered by the levy as they do not require a tourist permit but operate on the strength of agreements between the concerned state authorities.
The services rendered by the tour operator may be only for providing transport service within or outside the town, city or State's territorial limits. The services rendered by the tour operators may only be limited to providing transport services in relation to a tour or it may also include a host of other services as in case of a package tour. The services provided by such a tour operator may also include, apart from providing the basic service of transportation from one place to another, services of providing boarding and lodging arrangements, local sight seeing and guide services and a wide range of other value added services provided by the tour operators such as providing for porters, booking or arranging accommodation, reservation for entertainment/amusement parks, theatres and museums, providing health and baby sitting services etc.
The service tax on services rendered by tour operators in relation to a tour shall be the gross amount charged by such operator from the client and shall include the charges for other services provided, such as accommodation, food and other facilities in relation to such tour. In other words, it will be on the gross amount charged to the customer. However, in cases where the tour operator provides a package tour i.e. which necessarily includes accommodation for stay and may also include other facilities such as food, guide services etc, an abatement of 60% of the total amount charged may be given for the purpose of the service tax provided that the bill issued for this purpose clearly indicates that it is inclusive of such charges. In other words, service tax would be leviable on 40% of the total amount charged in cases where the tour operator provides a package tour and the price of which mandatorily includes charges for accommodation for stay provided during the course of tour (Notification No. 39/97-ST refers). Further an abatement of 90% from the gross amount charged to the client has been provided where the tour operator provides the services solely for booking or arranging accommodation (Notification 40/97-ST refers). However, this abatement will not be allowed in case the bill issued does not include the cost of such accommodation.
Service tax on services rendered by tour operators is only on services rendered in India in respect of a tour within Indian territory. Services rendered by tour operators in respect of out-bound tourism i.e. for tours abroad, do not attract service tax. In case of a composite tour which combines tours within India and also outside India, service tax will be leviable only on services rendered for tours wi:hin India provided separate billing has been done by the tour operators for services provided in respect of tours within India.
*Levy was originally efective from 01/09/1997 to 17/07/1998, vide Noti No. 37/97-ST, Dt. 22/08/1997. This service was exempted from18/07/1998 to 31/03/2000 by Noit.No. 52/98-ST, dated 18/07/1998.
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