“Tour Operator” means any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 or the rules made there under.”
Para 2(c) of Notification No.26/2012-ST, dated 20-6-2012 provides that “tour operator” means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.
Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:
Tax Collection of Service
Interest and penalties on such service
Provision relating to Negative List
Services of Tour Operator services are not included in the Negative List.
Provisions relating to exemptions
Small Service Provider
Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
To Foreign Diplomatic missions and their personnel
Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.
Services by TBI or STEP
Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted
Services provided to SEZ
Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.
Vide Notification No. 6/2014-ST, dated July 11, 2014, exemption has been provided to Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. Services provided by the Indian tour operators to foreign tourists in relation to tours wholly conducted outside India are being exempted. This exemption is available to Indian tour operators in cases where they organize tours for a foreign tourist wholly outside India, e.g., service provided to a Sri Lankan for a tour conducted in Bhutan. It may be noted that service provided by a tour operator in relation to an inbound or an outbound tours continue to be leviable to service tax. In brief:
Wholly In India
Wholly Outside India
Partially in India
Further, vide Notification No. 17/2014-Service Tax amending Notificaiton No. 25/2012-ST, exemption has been granted to Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement. For this purpose,
‘(zfa) “specified organisation” shall mean,-
(a) Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or
(b) ‘Committee’ or ‘State Committee’ as defined in section 2 of the Haj Committee Act, 2002 (35 of 2002);’.
Further, it has been clarified vide Circular No. 117/11/2009 – ST in respect of leviability of service tax on tour operator service in connection with Haj & Umrah Pilgrimage, The amount charged to the pilgrims in India undertaking Haj and Umrah pilgrimage, is for services provided by the Government of Saudi Arabia and the tour takes place outside India shall not be chargeable to Service Tax in India. The present case shall be in exempt in present scenario also as these services are received by individuals from outside India from a person located outside India for purpose other than business or commerce.
Provisions relating to Valuation and Abatement
Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.
In respect of these services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable services is to be determined in terms of provision of Section 67 read with the prescribed rules.
(A) Services provided by a tour operator in relation to a package tour, Abatement 75%
(B) Service is provided solely for arranging or booking accommodation for any person in relation to a tour, Abatement 90%
(C) For services other than package tour and booking of accommodation, Abatement 60%
Further, w.e.f 01-04-2016, the percentage of abatements have been substituted and new abatements in respect of tour operator services are given as under:
Description of service
Services by a tour operator in relation to,-
(i) a tour, only for the purpose of arranging or booking accommodation for any person
(ii) tours other than (i) above
Provisions relating to Cenvat Credit
If a tour operator is providing service in relation to which abatement benefit are availed, in such a case benefit of Cenvat credit on inputs/input services/capital goods used for providing such service is not available to the tour operator.
However, in case tour operator is providing services on which service tax is paidat the full rate i.e. without availing any abatement. In such case Cenvat credit of Input/input service/capital good used for providing such service shall be available to the tour operator.
However, difficulty may arise when tour operator provides both kind of service i.e. service on which abatement benefit are availed and services on which tour operator service tax is paid at full rate.
In such a case it is advisable to the tour operator to maintain separate accounts for receipt, consumption and inventory of all input/input services/capital good in respect of taxable service and abated service (i.e. service in respect of which abatement is availed).
However, if no separate account is maintained by the tour operator, in such a case tour operator shall follow either of the following option:
The tour operator shall pay amount equal to 6% of value of the services on which abatement benefit are availed.
The tour operator shall pay amount equivalent to the CENVAT credit on inputs/input services/capital goods used for providing service on which abatement benefit are availed.
Provisions relating to point of taxation
As per Rule 3 of Point of Taxation Rules, 2011, the point of taxation shall be-
Time when the invoice for the service provided or to be provided is issued. As per Rule 4A of Service Tax Rules, invoice shall be issued within 30 days from the date of completion of service. In case invoice is not issued within 30 days from the completion of service, the point of taxation shall be the date of completion of service.
In case where the person providing the service receives payment before the time specified above, the date of receipt of payment shall be the point of taxation.
In case of Tour Operator service entire payment is received in advance by the tour operator before the actual service are provided by him.
As per clause (b) of Rule 3 of Point of Taxation Rules, the service tax would be payable on receipt of such advance by the service provider. The actual service may be provided subsequently.
Provisions relating to Place of Provision of Service Rules, 2012
The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. Tour operator is an intermediary services and accordingly, the same falls within Rule 9 of Place of Provision Rules, 2012. The place is decided per the location of service provider. If the Tour operator is located in taxable territory, his services to any person shall be taxable and if he is located outside taxable territory, such services even to resident of India shall be non taxable. Accordingly, if a Tour operator is located in Jammu and Kashmir and he arranges Kailash Mansarover trip, no Service Tax is leviable on such services.
Provisions relating to reverse charge
Tour Operator services are not included under the mechanism of Reverse Charge. Hence, the person providing the service will be the person liable to pay service tax.
Important Case Laws / Precedents
In the case of Mangalore Tourist Service v. Commissioner of Central Excise, Mangalore  25 taxmann.com 207 (Bang. – CESTAT), it was held that tour conducted using tourists vehicles hired from third parties are also liable to service tax under Tour Operator’s services i.e. they cannot be taxed under Business Auxiliary Services.
In the case of Choudhary Yatra Co. (P.) Ltd. v. Commissioner of Central Excise, Nashik  25 taxmann.com 476 (Mum. – CESTAT), it was held that activity of reservation/renting of ordinary buses (not tourist vehicles) is liable to service tax under Tour Operator Services with effect from 10-9-2004.
In the case of Ideal Travels v. Commissioner of Central Excise, Mangalore  19 taxmann.com 145 (Bang. – CESTAT), it was held that Running of buses on pre-determined routes in scheduled hours under tourist permits granted under Motor Vehicles Act, 1988 would be covered under activity of ‘Tour operator’s service’.
In the case of Rishabh Travels v. Commissioner of Central Excise, Jaipur  17 taxmann.com 3 (New Delhi – CESTAT), it was held that where assessee plied buses having tourist permits for various destinations, booked seats for individual customers either itself or through booking agents, assessee was said to be conducting ‘Tour’ and was liable to service tax for same.