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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 ..... received for hotel room, while supplying the main taxable service of booking of hotel rooms, for which it gets service fee / convenience fee from Indian B2B or B2C clients? - HELD THAT:- as far as service of hotel accommodation is concerned, the same are supplied by the applicant to their clients on behalf of foreign hotels / hotel aggregators as their agent. Since, the applicant is charging the same amount from their client as is paid by them to the hotel aggregators and all other conditions of pure agent are also satisfied, the value of hotel accommodation cannot be added to value of their main service which is booking of hotel accommodation. Rate of tax on booking of hotel accommodation - HELD THAT:- 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 disputed their liability to pay GST @ 18% on all such amounts whether received from the clients or from the Hotel Aggregators. Who is liable to discharge GST liability - whether GST is payable on the amount received by the applicant from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applicable and rate of 18% GST will be applicable. 5. The rationale provided for such a view is the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount incurred to procure the hotel services, in addition to the amount received for the services 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant is passing on the total cost charged by the Hotel (USD 199.50 * 64.06) to the B2B client which contains the customer name and services rendered and in addition to that the applicant is charging 5% service fee of ₹ 655 as charges for its main service. 21. Since, it is satisfying all the conditions of Pure Agent, it is charging GST only on its service fee charged. The applicant would be passing on the supplier Hotel bill amount to the B2B client on 'As is' basis without giving any discount or inflating the supplier Hotel bill. Relevant Classification of Services: S. No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 400 9985 Support Services 435 Group 99855 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Table Sl No. Chapter, Section or Heading Description of Service Rate (per cent) Condition (1) (2) (3) (4) (5) 1 Chapter 99 All Services 23 Heading 9985 (Support services) (i) Supply of tour operators services. Explanation.- tour operator means any person engaged in the business of 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. 2.5 1. Provided that credit of input tax charged on goods and services used in supplying the Service has not been t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccommodation 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 taken, it shall mean that,- (a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and (b) credit of input tax charged on goods or services used partly for supplying such service and partly for eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign 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. Hence, there is no dispute on the taxability of this amount. 31. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost) is payable or GST @ 18% only on the service / convenience fee (by excluding the hotel cost) is payable, i.e. whether the applicant is liable to pay GST on the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel Aggregator, 40. Under section 9 of the CGST Act, 2017. GST is payable by the taxable person on the transaction value of supply of goods or services, except in the situations covered in section 9(3) and 9(4) of the Act where the receiver of the supply of goods or services is liable to pay tax. 9. Levy and collection. (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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of Section 24 of the CGST Act, 2017, the applicant is compulsorily required to be registered while acting as an agent for supply of services. 46. Hence, the applicant can be called 'taxable person' as per Section 2(107) of the CGST Act, 2017. 47. From the combined reading of Sections 2(5), 2(105), 2(107), 22 and 24 of the CGST Act, 2017, it is clear that the applicant is covered in the definitions of Agent , Supplier and Taxable Person . Further, the applicant is falling under the categories of persons under Section 22 and also under Section 24 requiring compulsory registration while booking 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of supply are in addition to the services he supplies on his own account. Explanation. - For the purposes of this rule, the expression pure agent means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 pure agent is given the following meanings. pure agent means a person who - a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both, so procured or provided as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. The important thing to note is that a pure agent does not use the goods or services so procured for his own interest and this fact has to be determined from the terms of the contract. In the illustration of importer and Customs Broker given above, assuming that the Contract was for clearance of goods and delivery to the importer at the price agreed upon in the contract. In such case, the Customs Broker would be using the transport service for his own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of 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 Registrar of the Companies. The fees charged by the Registrar of the companies, 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 reimbursement and not part of the value of supply made by A to B. Same examples of pure agent are: 1. Port fees, Port charges, Custom duty, dock dues, transport charges etc. paid by Customs Broker on behalf of owner of goods. 2. Expenses incurred by C F agent and reimbursed by principal such as freight, godown charges Illustration: Suppose a Customs Broker issues on invoice for reimbursement of a few expenses and for consideration towards agency service rendered to an importer. The amounts charged by the Customs Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of pure agent are also satisfied, the value of hotel accommodation cannot be added to value of their main service which is booking of hotel accommodation. 54. As far as the third issue is concerned, i.e. whether GST is payable on the amount received by the applicant from the clients as pure agent and is paid by them to the foreign hotel / hotel aggregator, it is seen that in respect of such services, the applicant is covered in the definition of Agent , 'supplier' and Taxable Person' under sections 2(5), 2(105) and 2(107) respectively of CGST Act, 2017. Hence, any liability to pay GST on such amount has to be discharged by the applicant. 55. section 12(1), 12(2) and 12(3) of the IGST Act, 2017 read as follows: Place of supply of services where location of supplier and recipient is in India. (1) The provisions of this section Shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India. (2) The place of supply of services, except the services specified in sub-sections (3) to (14),- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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