Service tax on Hotel accomodation from other travel agent

[deepak gulati]

We are providing services of hotel accommodation to various clients after adding our margin to the cost provided by the different travel agents from which we received the services . Please tell what kind of service it is and rate of service tax on it.

For example :-We are taking services from travel agent Rs. 2000/- and sell further to the direct customers at Rs. 4000 /- (includes value addition).

[Rajagopalan Ranganathan]

Sir,

Since the travel agent provide the service of procuring hotel accommodation to you, he will charge service tax on the same. Then it will be an input service to you. Therefore you can avail the service tax paid by the travel agent as credit. The service provided by you is classifiable under either 'Business Auxiliary Service' or 'Business Support Service'. For providing this service you have to pay service tax on ₹ 2000/- being your service charges. You can utilize the credit already taken by you for payment of service tax by you. But the total value of service provided by you is ₹ 4000/- and not ₹ 2000/-.

[KASTURI SETHI]

MY VIEW

Your service is classified under the category of ‘Bundled Service’ defined under Section 66 F(2), subject to the conditions laid down under Section 66 F (3) of the Finance Act, 1994. For payment of Service Tax this service is specified at serial no.4 of Notification No.26/12-ST dated 20.6.12 as amended for abatement of 30% from the gross amount charged. Abatement is subject to the conditions laid down in Column no.4. Also see Explanation B below the Table. You will pay ST @14.5% (including SBC) on 70% of the gross amount charged i.e. after availing abatement.’

Here Travel Agent has acted as intermediary. Intermediary Services are defined under Rule 2 (f) of Place of Provision Service Rules, 2012 inserted vide Notification No.28/12-ST dated 20.6.12 as amended vide Notification . No.14/2014-ST dated 11.7.14.

 

[KASTURI SETHI]

Meaning of Accommodationas per dictionary

whatever supplies a want or affords ease, refreshment, or convenience; anything furnished which is desired or needful; -- often in the plural; as, the accommodations -- that is, lodgings and food -- at an inn

[deepak gulati]

Thank you for the reply.

Basically i am tour operator,receiving services from other tour operator and i am not taking any commission but purchased the tours and sell them further to the clients . Can it becomes a tour operator service service?

[KASTURI SETHI]

This query is entirely different from the earlier one. Complete and true facts should be given at the first instance.

[KASTURI SETHI]

Sh.Deepak Gulati Ji,

You may call whatever you like. You say it is not commission; it is purchase and sale. O.K.You may be doing so but What I understand you are performing under mentioned activity also. I am not cock sure I am presuming this from the language of your question. You are to confirm whether I am right or not. After your reply, I would post another reply. Suppose Your tour-operator is 'A', Client (passenger/service receiver) is, 'B' You are,' C' and Hotel owner is, 'D'.

A passes on B to C and A gets ₹ 2000/- from you.And C further passes on B to D for hotel accommodation and you get ₹ 4000/- from D. Is it true or not ? If 'yes', your activity is covered under erstwhile BAS (Now 'intermediary' under other than negative list) as advised by Sh.Rajagopalan Ranganathan, Sir. If you say 'no', more details are required.

If you say 'yes', Not only you, A is also covered under BAS. The activity of Passing on client/passenger cannot be called tour operator service or travel agent service. What are facts I do not know.

[deepak gulati]

Thank you Sir, really obliged

[Mahir S]

Sir,

You shall have to pay service tax at full rate without any abatement , on the value of ₹ 4,000/-.

[KASTURI SETHI]

Sh.Mahir S.,

Sir, I agree with you. You have reflected and concluded my views.

AI Summary

Service tax on resold hotel accommodation: intermediary classification, input credit and competing bases for taxable value.
Resale of hotel accommodation procured from another agent may be classed as an intermediary or Business Auxiliary/Support Service, allowing input credit for tax paid by the upstream agent and treating the reseller's taxable service as its margin; alternatively it may be a Bundled Service subject to abatement on the gross charge, while another view requires tax at full rate on the entire amount charged to the customer.