Did you know Ancillary services provided to various tour operators is taxable @18% in GST
Ancillary services provided in tourism are services which makes the travel experience more comfortable, enjoyable and secure. They can be services like insurance of loss of any valuables, medical expenses covered during trips, tourist guide expenses etc. We will understand more about what theses services are and at what GST Rate they should be considered with the help of a interesting case of Crown Tours and Travels, In re- Authority for Advance Ruling – Rajasthan.
Are Ancillary services termed as support services? If Yes, what is the taxable rate of GST for the same?
In the case of Crown tours and Travels we will know what are ‘Ancillary Services’ and at what rate they are to be considered under GST
Facts of the Case
The applicant is engaged in business of providing Tour Operator’ as well as ‘Support Services’. In a particular set of transactions, the Applicant receives service orders from the main tour operator to provide a range of services to the passenger/tourist. There is a contractual understanding between the tourist and the main tour operator to provide a complete packaged tour. In turn the main tour operator engages the Applicant to provide one or more of the following services (hereinafter referred is ‘Ancillary Services’):
i. Elephant Ride at Amber Fort
ii. Guide Charges
iii. Assistance Charges
iv. Home Host Dinner
v. Lunch/Dinner at Local Restaurant
vi. Boat Ride at Udaipur
vii. Camel Ride at Jaisalmer
viii. Saree/Turban Tying
The said services are provided in association with the services of organisation of tour provided by the Main Tour Operator and together, they form a consolidated Tour from the perspective of the Customer. Thus, the Ancillary Services provided by the Applicant are essential part of the main services of organisation of tour which are provided to the Customer. Under GST, supply of Tour Operator Services is classified under Heading 9985 as Support Services vide Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. On a combined reading of notifications issued under CGST Act and RGST Act, the effective rate of tax comes to 5% on supply of tour operator service and 18% on other support services.
a) Whether the ‘Ancillary Services’ provided to various tour operators falls under Chapter heading 9985 (i) (Supply of Tour Operator Service) or 9985 (iii) (Support Services)?
b) What is the applicable tax rate for ancillary services provided to various tour operators?
Definition of the term Tour Operator as per Rate Notification:
a) 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.
b) any person engaged in the business of operating tours
Observation and Findings:
The submissions made by the applicant, it was found that, the applicant has sought advance ruling on the part where it is providing only ancillary services viz. Elephant Ride at Amber Fort, Guide Charges, Assistance Charges, Home Host Dinner, Lunch/Dinner at Local Restaurant, Boat Ride at Udaipur, Camel Ride at Jaisalmer Saree/Turban Tying etc. and is not involved in transportation and accommodation of persons/tourist engaged by tour operator.
In common parlance, Tour is understood as tourists, usually taken in groups by the tour operator by any mode of transport from one place to another and, en-route or at the terminal place, local sight-seeing trips (including visits to zoo, museum, monuments and other historic spots etc.), visits to temples or other places of worship, boat cruising in lakes, trips to hill resorts, etc. Thus, tours are organized or facilitated for the tourists by the tour operator.
In view of the definition of tour and tour operator, it was found that supply of transport service in a tour package is very essential to be classified as tour operator under GST Act. While examining the submissions of the applicant, it was observed that the applicant is engaged in business of providing services like sightseeing and other similar services but not providing service of transportation and accommodation, thus it is providing/supplying only a part of tour related services.
While going through the relevant notifications No. 11/2017 Central Tax (Rate) dated 28.06.2017 it was found that two conditions are essential to categorize a tour operator which are mentioned below:
a) Bill issued for supply of tour operating service should be a consolidated one i.e. inclusive of accommodation and transportation charges.
b) Provided that credit of input tax charged on goods and services used in supplying the service [other than the input tax credit of input service in the same line of business (i.e. tour operator service procured from another tour operator)] has not been taken.
In view of above conditions, it was observed that a gross amount should be charged by the Tour Operator for the entire Tour. In present case, the services provided by the Applicant has various activities like Elephant/Camel ride, Boat ride, Guide services, local sightseeing, dinner/lunch at local restaurant etc. For each such service no separate invoice is issued to the tourist and one consolidated bill is raised by the Applicant to the tour operator. The Applicant does not charge for the accommodation and transportation services as the same is not provided by the Applicant. Thus, the applicant does not satisfy the conditions for ‘tour operator’ and services provided by the applicant cannot be treated as “Tour Operator Services” in terms of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.
The services provided by the supplier are not in the nature of services provided by Tour Operator, the said supply of services cannot be classified under SAC 9985(i) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.
Ruling and Order
a. The ‘Ancillary Services’ provided by the applicant to various tour operators falls under Chapter heading 9985 (iii) (Support Services) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 (as amended).
b. The applicable rate of GST for ancillary services provided by the applicant to various tour operators is 18% (SGST 9% + CGST 9%).
The Services supplied to tour operators falls under SAC heading 9985(ii) (Support Services) other than Heading 9985(i) and applicable rate of GST is 18%.