Service Tax on Air Travel Agent Services

Definitions

1.  According to Section 65 (105) (l) any service provided or to be provided to any person, by an air travel agent in relation to the booking of passage for travel by air is a taxable service.

2. According to Section 65 (4) ‘air travel agent’ means any person engaged in providing any service connected with the booking of passage for travel by air.

Scope of Services

1. Service Tax is payable on commission received by air travel agent for booking domestic and international air tickets with the airlines.

2. The details of the commissions payable by any airlines is indicated in the agency agreement entered into between the airline and the air travel agent.

3. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, the fare collected, the commission earned along with other particulars. After adjusting the commission, be remits the balance amount to the airlines. This fortnightly return could be made the basis for assessment of Service Tax in respect of air travel agents.

Composition Scheme

In cases where the commission received by air travel agent is not ascertainable or where he opts for the composition scheme, service tax can be paid in the following manner:

Domestic Bookings         - 5% of Basic Fare  x  Rate of Service Tax

International Bookings – 10% of Basic Fare  Rate of Service Tax

There is no restriction on availment of CENVAT Credit.

Important Points

1. “Basic fare” is defined as that part of the fare on which commission is payable by the airlines.

2. Cancellation of Air Tickets – Cancellation or modification of tickets is a very common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the Service Tax is paid on the net commission received, the question of separately claiming refund of Service Tax may not arise.

Specific Exemption

The portion of the value received from the airline for booking of passage for travel by air which is in excess of the commission received is exempt for air travel agent.

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