Air Travel Agents – taken for a ride
Not only the actions, but the memory of Government officials is also pro revenue. Every time there is increase in the service tax rate, they never forget to make corresponding amendments in the rules. But when there is a decrease in the tax rate, they need to be reminded by the tax payers regarding the anomalies. We are talking about the service tax payable by the Air Travel Agents. The tax is payable at the rate specified in Section 66 of the Finance Act, 1994 on the amount of commission received. However, rule 6(7) of the Service tax rules, 1994 provides an option to pay service tax at the rate specified in the sub-rule on the basic fare. The rate payable on the basic fare has been arrived at by adopting the commission at the rate of 5% on domestic bookings and at the rate of 10% on international booking.
Tax rate under Section 66 | Domestic booking | International booking |
|---|---|---|
8% | 0.4% (5 % of %) | 0.8% (10 % of 8%) |
10% | 0.5% (5 % of 10%) | 1.0% (10 % of 10%) |
12% | 0.6% (5% of 12%) | 1.2% (10% of 12%) |
10% (from 24.2.2009) | 0.6% | 1.2% |
So, whenever, there was increase in tax rate under Section 66, corresponding amendment was promptly made in rule 6(7) of the Service Tax Rules, 1994, but when the rate has been reduced from 12% to 10% with effect from 24.2.2009, no corresponding amendment has been made so far. A concerned Air Travel Agent sent us a mail seeking clarification whether he has to pay at 0.6%/1.2% even when the tax rate is 10%.