2020 (9) TMI 295 - AAR - GST

Classification of services - Tour Operator service or not - rate of tax - local transportation services along-with services like sightseeing tour guide elephant ride etc. provided by the Applicant to The Main Tour Operator - taxable at the rate of 5% under Serial No. 23(i) Chapter head 9985 of Notification No. 11/2017-Central Tax (rate) dated 28.06.2017 (as amended) or otherwise? - HELD THAT - The applicant is involved in supply of local transportation service and services like elephant ride guide services and sightseeing to tourists engaged by various tour operators also called in trade parlance as Main Tour Operators (hereinafter MTO). The tourists as discussed above are primarily engaged by MTO and thereafter delegated to the applicant and the likes. The above said Notification also delineates two conditions for a tour operator - The first condition is related to restriction of input tax credit whereas second condition is related to criteria for inclusion of charges of accommodation and transportation in the bill of a tour operator; and The second condition clearly emphasise that a bill issued by a tour operator for supply of its services should be inclusive of charges of accommodation and transportation required for such a tour. The conjunction and clearly explains that accommodation and transportation both are must elements for a tour whereas conjunction or may have rendered option between accommodation and transportation. The applicant is rendering only transportation with some ancillary services and not accommodation as such does not satisfy the conditions as mentioned under Serial No. 23 (i) Chapter heading 9985 of Notification No. 11/2017-Central Tax (rate) dated 28.06.2017 (as amended) therefore rate of GST 5% is not applicable.

Issues Involved:
1. Classification of services provided by the applicant.
2. Applicability of the 5% GST rate under heading 9985(i) for the services provided by the applicant.

Issue-Wise Detailed Analysis:

1. Classification of Services Provided by the Applicant:

The applicant, engaged in providing local transportation services along with services like elephant rides, lunch/dinner, local sightseeing, and guide services, sought clarity on whether these services fall under the "Supply of tour operator services" as per the GST Act. The applicant raises a single invoice for all services provided to the Main Tour Operator (MTO), which includes charges for local transportation and other ancillary services. The applicant argued that these services collectively constitute a packaged tour, thus qualifying as tour operator services under heading 9985(i) of the Rate Notification.

2. Applicability of the 5% GST Rate under Heading 9985(i):

The applicant contended that the services provided should attract a 5% GST rate as per the Notification No. 11/2017-Central Tax (Rate), which prescribes a 2.5% central tax rate on tour operator services, subject to certain conditions. The applicant asserted that they meet the conditions specified in the Rate Notification, including not availing of input tax credit (ITC) for goods and services used in supplying the service, except for input services from another tour operator, and issuing a bill inclusive of all charges for the services provided.

Findings, Analysis & Conclusion:

1. The applicant is engaged in providing local transportation services and other ancillary services such as elephant rides, guide services, and sightseeing to tourists engaged by various Main Tour Operators (MTOs).

2. The Authority for Advance Ruling (AAR) previously ruled that the applicant is not a tour operator as per the definition and conditions provided in Serial No. 23(i) of Notification No. 11/2017-Central Tax (Rate). The current application includes an additional fact that the applicant provides transportation services to tourists, which the MTOs treat as tour operator services.

3. The key question was whether the applicant qualifies as a tour operator under the definition and conditions enumerated in Serial No. 23(i) of Notification No. 11/2017-Central Tax (Rate).

4. The Notification defines a tour operator as any person engaged in 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.

5. The definition includes four elements: planning, scheduling, organizing, and arranging tours; providing accommodation, sightseeing, and other similar services; engaging any mode of transport; and being engaged in the business of operating tours. The notification also delineates two conditions: restriction of input tax credit and inclusion of charges for accommodation and transportation in the bill.

6. The second condition emphasizes that a bill issued by a tour operator should include charges for both accommodation and transportation. The applicant, however, only provides transportation and ancillary services, not accommodation. Therefore, the applicant does not satisfy the conditions specified under Serial No. 23(i) of Notification No. 11/2017-Central Tax (Rate).

Ruling:

The services provided by the applicant do not fall under the purview of Serial No. 23(i) {Chapter heading 9985} of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended), and the 5% GST rate is not applicable.

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