The government this week issued an amendment on service tax applicable to tour operators, which threatens to hit their business, according to a tax expert.
From January 22, tour operators will be required to pay service tax on 60% of the total invoice they issue to customers. Until now, the tour operators paid service tax in two slabs.
For booking hotel accommodation, the tax was payable on 10% value and for other tours, the tax was payable on 30%.
“This amendment would be prejudicial to tour operators and may significantly impact the financial models of their business engaged in tour and travel booking,” said Rajeev Dimri, leader, indirect tax, BMR & Associates.
In the recent past, the travel industry was hit with intense inquiries and investigations from service tax authorities on services related to booking hotel accommodation.
“The recent amendment, instead of clarifying the issue, creates more doubts for the industry, specially related to taxability of the standalone hotel booking transaction in the hands of tour operators,” added Dimri.