Tour operators land 60% abatement for 2000-04

NEW DELHI: In a major relief to travel and tour operators, the government has decided to provide 60% abatement on service tax for the period April 2001 to February 2004. Tour operators would now be able to get tax exemption on 60% of the gross amount charged for the taxable services provided by them.

Tour operators functioning under a contract carriage permit issued by the appropriate transport authority for the movement of passengers are under the ambit of service tax levied at the rate of 12%. This comes even as the government is considering an increase in the exemption limit to 75% for tour operators.

According to sources in the tourism ministry, finance minister P Chidambaram had assured tourism minister Ambika Soni to give further abatement in other services. “It has been a long-pending demand of the tourism industry to allow 100% tax exemption, but going by the current scenario, we would only allow up to 75% exemption,” a tourism ministry official told ET.

“Representations were received from operators offering regular point-to-point transport between different cities or towns under contract carriage permit that they had been asked to pay service tax on 100% of the gross amount charged by them with effect from April 1, 2000, whereas service tax should be charged only on the commission earned,” says the finance ministry release said on Wednesday.

“We welcome the government’s proposal and wonder why at all leave the remaining 25%. In fact, the government should make India tourist-friendly by rolling back the service tax in its entirety. Anyhow, any gesture by the government is welcome. The industry would definitely benefit as it would make destinations less expensive,” Cox & Kings executive director Arup Sen told ET.

“It is difficult to say anything unless the move translates into reality,” a senior executive of an international travel company said.