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Valuation of services provided by air travel agents

CA Vipul Aggarwal (Chartered Accountant ) (454 Points)

20 December 2016

What would be the gross amount charged for air travel agents and how the service tax be calculated?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170108 Points)
Replied 20 December 2016

Taxable value of services for air travel agent is amount charged in bill excluding air fare but including commission received by air travel agent in relation to the booking. The agent can opt either of 2 methods for tax calculation

1. Taxable @ 15% over commission received or

2. Under composition scheme:

Domestic booking : 0.75% of basic fare

International booking: 1.5% of basic fare

Basic fair means part of the air fare on which commission is normally paid by airlines to air travel agent.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170108 Points)
Replied 20 December 2016

CA Vipul Aggarwal (Chartered Accountant ) (454 Points)
Replied 20 December 2016

Thank you sir for your reply.

Also i would like to ask for computing SSP limit in case of composition scheme, what would the Gross amount charged in that case?

And in normal case, whether commission recd. from customers will be only considered which is not shown separately in invoice or commision earned through airlines will also be taken into consideration?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170108 Points)
Replied 20 December 2016

1. "............computing SSP limit in case of composition scheme, .........."

Both are independent of each other. SSP limit is upto first 10 lakhs turnover; once crossed, ST liability applicable. Now its assessee to decide whether to choose composition rate, or full rate with ITC,

2. Let me understand how you collect commission from customer without any bill? How you account it in books?

CA Vipul Aggarwal (Chartered Accountant ) (454 Points)
Replied 20 December 2016

Sir,

1. If assessee chose for composition scheme and forgo his ITC, then shall he pay service tax from the very first transaction or wait for crossing his sale of tickets by 10lakhs?

2. I'm not saying that no invoice is raised, actually i meant to ask that whether both the commission recd. from airlines and customers be accounted for while calculating gross amount charged for travel agency services?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170108 Points)
Replied 20 December 2016

1. For the first time crossing SSP limit, he has to charge over and above Rs. 10 L; but for next year onwards he has to charge from first rupee itself.

2. YES. By whatever means. it the amount is accounted in books, its chargeble to tax.