Issue of service tax on sub agent of Air travel agents

[Shashi Goswami]

Sir,

One of our clients a Pvt. Ltd company, are in Air Trave business and booking air tickets by using portals of IATA registered agent like Ezeego, Makemy Trip etc. For providing this service they are getting commission from them. further our client is getting the business done through their sub agent also and in turn, they are passing the commission earned, to them.

On verification of the records we observed that IATA registered agents are making the payments of commission to our client after deducting the Service Tax (12.36%) from the amount ( as if it is under RCM). Similarly our client is also deducting the service tax from the commission while making the payment to sub agent. To our understanding this is not covered under RCM and this service is taxable as intermediary service as defined under clause(f) of Rule 2. we were told by our client that the big agency houses like Riya Travels, Akbar travels, TSI Yatra etc they all are following this practice.

My queries are followings :

1. Whether this process is legally correct ?

2. Is this service under RCM

3. When on Commission part Service tax was already deducted by IATA whether i also required to deposit service tax on commission earned by our client.

I shall be pleased to have your valued guidance in the matter

Thanks with Regards

CA Goswami S.K. Bharti

Partner

M/s Bandyopadhyay & Dutt

[Richa Keshari]

Dear Sir,

In my view, practise followed by your clients is erroneous. Such activities are not covered under RCM. Since in case of commission received from IATA registered agent for booking tickets from their Portals, IATA registered agent are services recipients and incidence of tax lies on them. Company should collect service tax from such agents and pay to government treasury in their own STC code.

 

Again in case of commission being paid to sub agents for getting business done, company should avail cenvat credit of service tax paid by sub agents on such commission.

Regards

Richa Keshari

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