Service Tax on services rendered by Tour operators - Service Tax - F. No. B. 43/10/97-TRU

Service Tax on services rendered by Tour operators F. No. B. 43/10/97-TRU Dated 22nd August, 1997 Attention of the Trade is invited to Madurai Commissioner's Trade Notice No. 27/97 (04/Service Tax/97), dated 4-3-1997 wherein it was informed that the Finance Bill, 1997 proposed to extend levy of service tax on new services. Of the new services proposed in the Finance Bill, 1997 the services rendered by the Tour Operators have now been brought under Service Tax net with effect from 1-9-1997. Notification Nos. 37/97-S.T. to 40/97-S.T., all dated the 22nd August, 1997 have been issued in this regard. 2. Tour Operators 2.1 As per Section 88 of the Finance Act, 1997 `Tour Operator' means a person who holds a tourist permit granted under the rules made under the Motor Vehicles Act, 1988 and 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. 2.2 As per Rule 82 of the Central Motor Vehicles Rules, 1989 a tourist permit is granted only for a `tourist vehicle'. As per the Motor Vehicles 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 a motor vehicle provided that the tour operator holds a tourist permit under the Motor Vehicles Act, 1988 in respect of any motor vehicle. Service tax will chargeable on all domestic and inbound 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 buses (which also hold tourist permits) within and outside the State where they have been registered as tourist vehicles. 2.3 The tour operator can be a self-employed, single vehicle owner individual or a well organised firm providing a vast range of professional services in the field of tourism-whether organised as a sole proprietorship, partnership, a private or a public limited company. Even public sector undertakings operating tours, such as Indian Tourism Development Corporation, Delhi Tourism Development Corporation etc. are covered under this levy. However State Roadways Corporations who ply passengers in the neighbouring States 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. 2.4 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 service in relation to a tour or it may also include 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 services of transportation from one place to another, services of providing boarding and lodging arrangements, local sightseeing 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. 2.5 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 purposes 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 the tour (Notification No. 39/97-S.T. 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 of booking or arranging accommodation and the bill issued for this purpose includes cost of such accommodation (Notification No. 40/97-S.T. refers). However this abatement will not be allowed in case the bill issued does not include the cost of such accommodation. 2.6 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 within India provided separate billing has been done by the tour operator for services provided in respect of tours within India. 3. General 3.1 As per Section 69 of the Finance Act, 1994, read with Rules 3 and 4 of the Service Tax Rules, 1994, every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under Rule 3. Notification No. 38/97-Service Tax, dated 22-8-1997 amends Rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the services provided by tour operators shall be the operator who raises the bill for services rendered to any person by such operator. 3.2 Rule 6 of the Service Tax Rules deals with the payment of Service Tax. State Bank of India is authorised to collect the service tax in this Commissionerate. A copy of TR-6 form (Challan) is enclosed for the purpose of deposit of service tax. 3.3 The Heads of Accounts for payment of Service Tax on the above services will be intimated in due course. 3.4 The assessees will apply for Registration in Form ST 1. An acknowledgement will be provided on the duplicate copy of the ST 1 form by the Superintendent of Central Excise in whose jurisdiction the assessees operate. The Registration Certificate is in Form ST 2. The Quarterly Return showing the collection and payment of Service Tax is in Form ST 3. 3.5 For the convenience of the assessees the following are enclosed (i) Service Tax Rules, 1994 (ii) Forms ST 1 to ST 3 (iii) TR-6 Form (Challan) (iv) Copy of Notification Nos. 37/97-S.T. to 40/97-S.T. all dated the 22nd August, 1997 (v) Order No. 3/3/94, dated 11-10-1994 and 6/1/97, dated 22-8-1997 issued under Service Tax Rule (3). 4. In case of any difficulty the assessees are requested to contact the jurisdictional Superintendent of Central Excise, or the Assistant Commissioner of Central Excise or this Office. 5. This may be brought to the notice of all constituent members of your Trade Association.