Service Tax on Travel Agent’s Services

[Dr. Sanjiv Agarwal]

Service tax has been imposed on travel agent’s services rendered by any travel agent by the Finance Act, 2004 with effect from 10th September, 2004. The gross amount charged to or total consideration received from any person in relation to services connected to booking of passage for travel is chargeable to service tax, i.e. services provided by travel agent to any customer. However, services related to air travel agents and rail travel agents are not covered in this category.

Meaning of Travel Agent

Section 65(115a) defines ‘travel agent’ as under —

“travel agent means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent”.

The above definition is a specific and exclusive definition of travel agency according to which –

(a) travel agent may be any person (i.e. individual, firm, company, commercial concern, etc.)

(b) he must be engaged in providing a service.

(c) the said service must be any service connected with booking of passage for travel.

(d) booking of passage for travel can be by any mode of transport except air and railways.

(e) travel agent does not include —

(i) air travel agent

(ii) rail travel agent

Booking of passage for travel would include ticketing or arranging or organizing the travel passage.

Taxable Service

Section 65(105)(zzx) defines ‘taxable service’ as under —

“any service provided or to be provided to any person, by a travel agent, in relation to booking of passage for travel”.

The services rendered by travel agents/agency shall be taxable to service tax when provided to a customer and when the services so provided relate to booking of passage for travel. The booking should be for passage leading to undertake a journey by travelling.

Taxable services should satisfy the following conditions —

(a) services should be provided to a customer, (upto 15-5-2008) and to any person (w.e.f. 16-5-2008).

(b) services should be provided by any person who is a travel agent.

(c) Services should be in relation to booking of passage by air.

(d) Service does not include services rendered by rail travel agents/air travel agents.

Business auxiliary services are different from travel agent services which is a distinct taxable service under section 65 (105) (zzx) of the Finance Act, 1994.  Travel agent means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent. Taxable service means any service provided or to be provided to any person, by a travel agent, in relation to booking of passage for travel.  On the other hand, business auxiliary services [section 65 (12)] covers marketing, sales promotion and other services including services rendered by commission agents. In the instant case, querist is not a commission agent but a travel agent and as such, he shall be liable to Service Tax under travel agency services.

Replacement of ‘customer’ with ‘any person’

Finance Act, 2008 has substituted the words ‘any person’ for the word ‘customer’ w.e.f. 16.5.2008 as the service tax is levied on service and status of recipient of taxable services should not determine the tax treatment of a given service.

In Sharma Transports v. CC, CE & ST (Appeals), 2009 -TMI - 34216 - CESTAT, BANGALORE, it was held that assessee’s selling of passenger tickets as an agent and receiving commission is covered as travel agent’s service and not as business auxiliary service.

Travel agents providing services of booking of passage by road, boats, steamer, fiery, sea cruise etc. shall be covered for service tax. Agents booking conducted tours will also be covered.

Departmental Clarification

CBEC has clarified as follows vide Circular No. 80/10/2004-ST dated 17-9-2004:

Extension of service tax on air travel agents and rail travel agents to other travel agents

“At present, service tax is leviable on air travel agents and rail travel agents. Travel agents of other modes of transport (road, water) are not covered under service tax. The scope of service tax has been extended to include all travel agents. The taxable service is the service provided by travel agent in relation to the booking of passage for travel by modes other than air and road.”

Value of Taxable Service

W.e.f. 1.3.2008, taxable service provided by a person located outside India, in relation to booking of an accommodation in a hotel located in India for a customer located outside India has been exempted from levy of service tax vide Notification No. 14/2008-ST dated 1.3.2008. However, if a travel agent is in India, it will attract service tax. Even when service receiver is in India, service tax would be payable.

Specific Exemption

Taxable services provided outside India for booking hotel accommodation in India for a customer located outside India is exempt from service tax vide Notification No. 14/2008-ST dated 1-3-2008.

Person Liable

Every travel agent providing taxable services to any person shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.