Tour operators will have to pay a service tax on 60 per cent of the amount they bill the customer from January 22, according to a government notification.
Earlier, tour operators offering a package tour had to pay service tax on 25 per cent of the bill amount, on 10 per cent of the bill amount if the tour operator only arranged or booked accommodation for a person in relation to a tour, and on 40 per cent of the bill amount if any other tour-related services were offered.
“The government has changed the service tax applicable on tour operators,” Rajeev Dimri, Leader, Indirect Tax, BMR & Associates said. “With effect from January 22, 2017, tour operators would be required to pay service tax on 60 per cent of the total invoice value.”
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“The recent amendment, instead of clarifying the issue, creates more doubts for the industry, specially related to taxability of the stand-alone hotel booking transaction in the hands of tour operators,” Mr. Dimri said. “The tour and travel industry has been plagued with intense inquiries and investigations from service tax authorities with respect to services related to booking hotel accommodation.”
“This amendment would be prejudicial to tour operators and may significantly impact the financial models of their business engaged in tour and travel booking,” he said. A tour operator is “any person engaged in the business of planning, scheduling, organising, arranging tours by any mode of transport, and includes any person engaged in the business of operating tours,” as per the rules.