tour operators

Last updated: 07 September 2007

PRESS RELEASE

The Central Government has increased the rate of abatement to 75% for the purpose of levy of service tax on taxable services provided by tour operators in relation to package tours. To this effect, the Central Government has issued Notification No.38/2007-ST dated 23.8.2007 amending Notification No.1/2006-ST dated 1.3.2006.

Services provided by tour operators, in relation to a tour, are leviable to service tax under Tour Operators Service. At present, tour operator, providing package tour which includes provision of transportation, accommodation for stay, is liable to pay service tax on 40% of the gross amount charged for such tour. In other words, 60% of the gross amount charged is provided as abatement for the purpose of levy of service tax.

The Indian Association of Tour Operators (IATO) requested to increase the rate of abatement on package tour services provided by tour operators. The suggestion has been recommended by Ministry of Tourism. The request of the Indian Association of Tour Operators was examined by the Advisory Committee on Service Tax Abatement and the Committee has recommended to prescribe the rate of abatement of 75% on package tours where the gross amount charged includes cost of accommodation, food, transport arrangement, tourist guide, entry to monuments and other similar categories of expenditure.

The recommendation of the Committee was accepted by the Government and a notification prescribing abatement rate of 75% to services provided by tour operators in relation to a package tour wherein cost of accommodation, food, transport arrangement, tourist guide, entry to monuments and other similar services are included as part of the package tour has been issued. As a result of this Notification, the tour operator is required to pay service tax only on 25% of the gross amount charged on such package tour.

For details Notification No.38/2007-ST dated 23.8.2007 may be referred to.