9911796707
TMI BlogTOUR OPERATORS: CRY IS STILL ON, BUDGET 2014 PARTLY WIPED THEIR TEARSX X X X Extracts X X X X X X X X Extracts X X X X ..... TOUR OPERATORS: CRY IS STILL ON, BUDGET 2014 PARTLY WIPED THEIR TEARS - By: - Pradeep Jain - Service Tax - Dated:- 13-8-2014 - - INTRODUCTION The budget 2014 has arrived and the Hon ble Finance minister has bought in several, if not many, changes in the service tax regime. In his endeavour to put the indirect tax laws in road to GST, he has avoided major changes but for small. However, these small changes have somewhat failed to meet the expectations of few sectors. This sentence seems to be 100% correct in case of travel agents and tour operators. Why? Answer is here in this piece of diction BACKDROP The story started with the introduction of negative list and place of provision of services rules in July 2012. In our pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious two articles titled Travel agents: Travelling in uncertainties of service tax law part I and part II , we had in detail discussed the confusion and ambiguities being faced by the tour operators and travel agents due to simultaneous effect of the rule 6A of Service Tax Rules, 1994 and the rule 9 of the Place of Provision of Service Rules, 2012 . In the above mentioned two articles carried out at the eminent website of Taxindiaonline.com, we have brought the anomalies faced by the tour operators and travel agents. These service providers earn foreign exchange by providing their valuable services to the foreign nationals, however, by virtue of existing rule 9 of the POPS Rules ; the place of provision of service is taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territory. The cases where the place of provision of service is taxable territory cannot be termed as export of service under rule 6A of the Service Tax Rules, 1994 inspite of the fact that the valuable foreign exchange is being earned. This anomaly was also represented to Central Government and it was hoped that the Budget, 2014 will come up with the adequate amendment in these rules. However, the amendments made in this regard do not seem to fulfil the desires of travel agents and tour operators. THE AMENDMENTS Budget, 2014 has made two amendments with respect to the issue discussed herein:- Amendment-1 :- First amendment has been made by amending the mega exemption notification no. 25/2012-ST dated 20.6.2012 . Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification no. 6/2014-ST dated 11.7.2014 has inserted a new entry no. 42 in the list prescribed in the mega exemption notification. This entry no. 42 reads as follows:- 42. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. . Thus, by virtue of this entry, the services provided by a tour operator will be exempted if the following conditions are satisfied:- The services are provided by a tour operator. The services are being provided to a foreign tourist. The services should be in relation to the tour which is conducted wholly outside India. Implication of this amendment:- Inserting the entry no. 42 in the mega exemption notification confirms the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no exemption if the similar services are carried out partly within India and partly outside India. Also, if the services are rendered wholly within India, no exemption is there despite fact that the services are being rendered to the foreign tourists and valuable foreign exchange is earned. Since the exemption has been given exclusively to the foreign tours, it is going to benefit only the big names of the tourism sector and the small tour operators will suffer as were suffering prior to this amendment. Even the representation made by the association of tour operators had clearly brought about the fact that levying the service tax on their services will dump the Indian tour operators and they will not be able to survive in fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ont of the giants of tourism sector. This amendment has not done anything for the small and medium tour operators carrying out the tours within India and problem will continue as it is, excluding a few who will get benefitted by this amendment. Amendment-2:- Second amendment has been made in the rule 9 of Place of Provision of Services (POPS) Rules, 2012 . This rule states that the place of provision of services in the specified cases will be the location of service provider. The specified cases cover the intermediary services . The definition of intermediary specifically excluded the services provided by commission agent of goods . Now, this definition has been amended and the new definition reads as follows:- (f) interme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the main service) or a supply of goods , between two or more persons, but does not include a person who provides the main service or supplies the goods on his account; ; Thus, by virtue of new definition, the term intermediary will now include the commission agent of goods also. Accordingly, the rule 9 of POPS rules will be equally applicable on the commission agent of goods and place of provision of service will be the location of service provider in this case. Implication of this amendment:- This amendment has wide range of implications which have been discussed as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- Including the commission of agents of goods in the definition of intermediary has brought the same under the purview of rule 9 of the POPS Rules . Thus, the place of provision of service will be location of service provider, i.e. within taxable territory in the cases where the commission agent is an Indian establishment or Indian individual. Rule 6A of the Service Tax Rules, 1994 states that there shall be export of service if the conditions prescribed in this rule are satisfied. One of the conditions is that the place of provision of service should be outside taxable territory. Since this condition is not satisfied in case of the services provided by the Indian commission agent (though he is providing the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to export goods), it will not be treated as export of service. Accordingly, service tax would be levied on these services. Since the services of commission agents in relation to export goods is taxable, it will be out of pocket expense for them as the department is reluctant in allowing its Cenvat credit in view of High Court decision given in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II Versus M/s CADILA HEALTH CARE LTD. [2013 (1) TMI 304 - GUJARAT HIGH COURT ]. In case of foreign commission agent, the place of provision of service as per rule 9 of POPS will be location of service provider , i.e. outside India. Accordingly, it will be treated as export of service provided all the other condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions prescribed in rule 6A of the Service Tax Rules, 1994 are satisfied. Therefore, being an export of service no service tax would be levied in this case. The services provided by the foreign commission agent in respect of the export goods are already exempted under the notification no. 42/2012-ST dated 29.6.2012. This notification exempts the services provided by a commission agent located outside India and engaged by the exporter in India to act on his behalf to cause sale of goods exported by him. This exemption is allowed subject to satisfaction of conditions specified in this notification. The services provided by the foreign commission agent will not now get covered in the charging section 66B of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act which reads as follows:- 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Where the services are being provided is to be determined by the provisions contained in POPS rules . rule 9 of the POPS rules covers the case of foreign commission agent of goods. Thus, the POPS will be location of service provider, i.e. outside India. Thus, the services provided by the foreign commission agent will not be covered by the charging section 66B, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, no service tax can be levied on the same. Now, since the absolute exemption has been given to services provided by the foreign commission agents causing sale of goods by virtue of rule 9 of POPS rules ; the exemption notification no. 42/2012-ST dated 29.6.2012 will become obsolete. GOOD BYE WORDS:- One amendment made in POPS rules related to commission agents of goods can be said to have given somewhat relief to the exporters who shall now get the absolute exemption without satisfying the conditions laid down in the notification no. 42/2012-ST . However, the most awaited first budget of Modi government can be said to have failed in meeting the expectations of the tour operators. Before the announcement of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udget, the tour operators were eagerly waiting for a necessary amendment in the POPS rules or in the rule 6A of the Service Tax Rules so that the anomaly gets rectified and their services come under the purview of export of services. However, this budget has not come up with that kind of amendment in the POPS rules or in the Service Tax rules. Rather, another exemption and that too improper, has been given in the mega exemption notification. As rightly said, only solution is not sufficient; it should be a proper solution. Here the solution is not proper, so department will get set and go for the war against the innocent tour operators, ultimately hampering the growth of Indian tour operators and tourism too. - Reply By satbir sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh wahi as = Sir Now by this amendment , whether EXP 4 need not be filed by 15/10/2014. Dated: 14-8-2014 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
