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TMI Blog2019 (8) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ravel agents & tour operators (B2B Clients). The applicant does online booking of Hotel Rooms from the Hotel Aggregators as per its client's requirements & makes payments for the same on behalf of the B2B Clients. 3. These can be summarized as follows: i. The applicant entered into contract with different Hotel Aggregators (Suppliers). ii. The applicant also entered into contract with B2B Agents (Customers) / B2C to provide Hotel booking services. iii. The applicant provides Hotel booking services to B2B Agents / B2C and acts as their Pure Agent. iv. The applicant raises bills on B2B Agents / B2C showing Hotel Cost & its Commission / Fee separately in the invoice and charge GST @ 18% only on its Commission / Fee component. v. The Hotel Aggregators raise consolidated bill in the name of applicant mentioning the respective name of B2B Agent / B2C who used these Hotel services. vi. The applicant does not use for its own interest hotel services so procured. 4. A view suggested by some consultants that 'Accommodation Only' Services are not covered under the above entry of 'Tour Operator' services and hence the GST rate of 5% (with no ITC) will not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it provides on its account. Question No. 2: 11. Is there any option available to a 'Tour Operator' to either charge GST@ 5% (with no ITC) or charge GST @ 18% (with full ITC) Views of the Applicant: Question No. 1: 'Accommodation Only' services: 12. The applicant satisfies the above stated conditions of Pure Agent, accordingly, it should charge GST@ 18% on only its Service Fees / Convenience Fee. Question No. 2: 'Tour Operators' services: 13. Based on the interpretation of the notification prescribing GST rates for Tour Operators, an option of charging either GST@ 5% (with no ITC) or GST @ 18% (with full ITC) should be available to the applicant in order to pass on the free flow of GST input benefit to its customers. 14. The applicant would be providing an online platform for providing facilitation services for helping passengers / end customers (B2B / B2C clients) to make travel bookings. The applicant will collect its service fee in addition to the hotel accommodation charged by the overseas vendor/ hotel from the end customer, in the capacity of a 'pure agent' of the end customer. The Charges shall be remitted 'as is' to the vendor / hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 400 9985 Support Services 435 Group 99855 Travel arrangement, tour operator and related services 436 998551 Reservation services for transportation 437 998552 Reservation services for accommodation, cruises and package tours 438 998553 Reservation services for convention centres, congress centres and exhibition halls 439 998554 Reservation services for event tickets, cinema halls, entertainment and recreational services and other reservation services 440 998555 Tour operator services 441 998556 Tourist guide services 442 998557 Tourism promotion and visitor information services 443 998559 Other travel arrangement and related services nowhere else Classified RELEVANT NOTIFICATIONS: 22. Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017: In exercise of the powers conferred by sub-section (1) of section 9, subsection (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying the service other than the input tax credit of input service in the same line of business (i.e. tour operator service procured from another tour operator), has not been taken [Please refer to Explanation no. (iv)] 2. The bill issued for supply of this service indicates that it is inclusive of charges of accommodation and transportation required for such a tour and the amount charged in the bill is the gross amount Charged for such a tour including the charges of accommodation and transportation required for such a tour. (ii) Services by way of house-keeping, such as plumbing, carpentering, etc. where the person supplying such service through electronic commerce operator is not liable for registration under sub-section (1) of section 22 of the Central Goods and Services Tax Act, 2017. 2.5 Provided that credit of input tax charged on goods u and services has not been taken [Please refer to Explanation No. (iv)] (iii) Support services other than (i) and (ii) above. 9 - 24. Explanation (iv): Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel Components is solely the responsibility of the applicant. 29. Under the above agreement, the applicant is booking hotel rooms in foreign countries for its Indian clients. The applicant is also required to collect payment for the hotel accommodation services from its clients for onward remittance to DOTW. 30. The applicant has claimed that they are receiving the following amounts during the supply of such services: i. The cost of Hotel Accommodation, which is paid by the Indian clients to the applicant in Indian Rupees. The applicant has claimed that they are sending the said amount in foreign exchange to the foreign Hotel Aggregator and are acting as their pure agent. They have claimed that this amount is not liable to the payment of GST. ii. Service Fee / Convenience Fee / Commission is received by them from the Indian B2B or B2C clients. The applicant has admitted that they are required to pay GST @ 18% on this amount. Hence, there is no dispute on the taxability of this amount. iii. They are also receiving target based sales Commission from the Hotel Aggregators. The applicant has admitted that they are required to pay GST at the applicable rates on this amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total amount paid by the clients (including cost of Hotel Accommodation) or only on the Service fee / convenience fee received by them. iv. Whether any option is available under S. No. 23 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 to the 'Tour operators' to either pay GST @ 5% (with no ITC) or to pay GST @ (with full ITC). In Other words whether it is permitted to a tour operator who is able to satisfy condition no. 2 given in column (5) of S. No. 23 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 but is willing to pay GST @ 18% so as to take the benefit of ITC. Question No. l: 33. As far as the first question is concerned i.e. whether the applicant is liable to pay GST on only the service or convenience fee, the main argument of the applicant is that they are acting as "Pure Agent" in case of 'Hotel Accommodation' Service. However, before deciding whether the applicant can be called a pure agent, it needs to be decided that whether, the applicant can be called an "agent" under Section 2(5) of the CGST Act, 2017. 34. It is Observed that booking of Hotel Accommodation is being done by the applicant on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intro-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under Section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. **** (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The central tax in respect of the supply of taxable goods or services or both by supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hotel Accommodation in foreign countries for its clients in India. 48. The second issue for decision is whether the applicant is acting as a "pure agent" in respect of amount received by them from the clients which is remitted by the applicant to the foreign Hotel Aggregators. 49. Section 15 of the CGST Act, 2017 read as follows: (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any low for the time being in force Other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A's recovery of such expenses is a disbursement and not part of the value of supply made by A to B. 51. Clarification issued by CBEC on Pure Agent concept in GST: "Introduction The GST Act defines an Agent as a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name caned, who carries on the business of supply or receipt of goods or services or both on behalf of another. So, who is a pure agent and why is a pure agent relevant under GST? Broadly speaking, a pure agent is one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his own supply) for such supplies from the recipient of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be using the transport service for his own Interest (as the agreement requires him to deliver the goods at the importers place) and thus would not be considered as a pure agent for the services of transport procured. Another important fact is that, the person who provides any service as a pure agent receives only the actual amount for the services provided. Coming back to our example of importer and Customs Broker, the agreement provides reimbursement of transport services utilised at actuals. In this case, let's say the value of transport service was Rs. 10,000/-, if the Customs Broker charges any amount more than Rs. 10,000/-, then he will not be considered as a pure agent for the services of transport and the value of transport service will be included in the value of his Customs Broker service. EXCLUSION FROM VALUE Expenditure incurred as pure agent becomes relevant, when it comes to determining the value of a supply for levy of GST. The preceding para explains who will be considered as a pure agent. The valuation rules provide that expenditure incurred as pure agent, will be excluded from the value of supply, and thus also from aggregate turnover. However, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and travelling/ hotel expenses shall be added for determining the value of supply by the Customs Broker whereas Docks dues and the Customs Duty Shall not be added to the value provided the conditions of pure agent are satisfied. CONCLUSION A pure agent concept is an important one for businesses it has direct implications on the value of taxable service. It has direct bearing on the amount of GST charged on a particular supply. It also has bearing on the aggregate turnover of the supplier and therefore on calculating the threshold limit for registration, Whenever the intention is to act as a pure agent, care should be taken to ensure that the conditions specified for such pure agents and further conditions given in the valuation rules are also met so that only the real value of the service provided is subjected to GST," 52. From the above, it is clear that the applicant is engaged in rendering services of booking of hotel accommodation. The consideration for rendering such services is partly received from the Indian clients as service fee / convenience fee and partly received from the foreign Hotel aggregator as target based sales commission. The applicant has not disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant has contended that they as a tour operator have an option to avail the ITC provided they pay GST @ 18% (9% CGST + 9% SGST). However, the view of the applicant is not correct as only those support services are covered under GST @ 18% (9% CGST + 9% SGST) which are not 'tour operators services'. Ruling 62. The applicant is supplying booking of hotel accommodation services. They are admittedly paying GST @ 18% (9% CGST + 9% SGST) on service fee / convenience fee / commission received from clients and also on target based sales commission received from the foreign hotel aggregators (DOTW). The value of 'hotel accommodation' paid by the client to them, which is remitted by them to the foreign hotel / hotel aggregator cannot be included in such taxable value, provided the conditions of pure agent are satisfied. 63. The applicant is required to collect/ deposit GST under Section 9(1) of the CGST Act, 2017 on the amount received by them from the clients on the value of 'hotel accommodation' service, while acting as an agent under Section 2(5) of the said Act being "taxable person" defined under Section 2(107) of the said Act and "supplier" defined unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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