Union Budget 2016-17 - Service Tax amendments relevant for Tour Operators and Krishi Kalyan Cess

3rd March 2016 
 
To, All Members, 
 
Dear Colleagues, 
 
Sub: Union Budget 2016-17 - Service Tax amendments relevant for Tour Operators and Krishi Kalyan Cess 
 
As you are aware, the Finance Minister has presented the Union Budget 2016-17 in the Parliament on 29.02.2016. Several amendments have been proposed in the Union Budget on the service tax side.  Important amendments relevant for Tour Operators are being explained below:- 
 
ABATEMENT ON SERVICES OF TOUR OPERATORS FOR SERVICE TAX PAYMENT 
 
In the case of “package tour”, abatement @ 75% from the gross amount charged by the Tour Operator is currently available so that service tax is payable on balance 25% portion with the facility of availing CENVAT Credit of service tax charged by another Tour Operator. The abatement is reduced from 75% to 70% in the case of package tour. In other words service tax will now be payable on 30% of the gross amount. 
 
In the case of other services including arranging cabs etc., abatement @ 60% is currently available so that service tax is payable on balance 40% portion with the facility of availing CENVAT Credit of service tax charged by another Tour Operator. Here the abatement is increased from 60% to 70% making the Tour Operator to pay service tax on 30% of gross amount as in the case of package tour. 
 
The Tour Operator is not entitled to avail CENVAT Credit on input, capital goods and input services other than input services of a Tour Operator. There is no change in this provision. 
 
Revised chart of Service Tax applicable for tour operators w e.f. 1st April 2016 is as under:-  
 
SERVICE SERVICE TAX @ 14 %  S.B.CESS @ 0.50 % TOTAL SERVICE TAX
ROOM ONLY 1.40  % (After abatement of 90%) 0.05 % 1.45  %
Other than above including TOUR PACKAGEs and TRANSPORT  4.20 % (after abatement of 70%) 0.15 % 4.35 %
Those who are registered under TRANSPORT CATEGORY 5.60 % (After abatement of 60%) 0.20 % 5.80%
 
Please note that 
 
CENVAT Credit will be available only between tour operators to tour operators, 
CENVAT Credit will be available on Service Tax part only 
Swachh Bharat Cess to be shown separately as “SB Cess”. No CENVAT Credit will be available on SB Cess.
Revised rates as indicated in the above table shall apply to invoicing made on or after 01.04.2016.
There is no other change in service tax rate between 01 April 2016 to 31st May 2016 
 
 
KRISHI KALYAN CESS:- 
 
From 01.06.2016, a cess known as “Krishi Kalyan Cess” (in short KKC) shall be levied as service tax on all or any of the taxable services @ 0.5% of the value of services. 
 
KKC shall be in addition to any other cess or service tax leviable on taxable services. 
 
Credit of KKC paid on input services shall be allowed to be used for payment of KKC on output services rendered by the service provider. For this purpose the Government will amend CENVAT Credit Rules in due course. 
 
 
In this case details are being worked out as notification especially in connection with service tax on domestic and international tickets has not been issued. However, for the benefits of tour operators, the service tax rates shall stand revise w.e.f. 01st June 2016 as under:- 
 
SERVICE SERVICE TAX @ 14 % S.B. CESS @ 0.50 % Krishi Kalyan Cess @ 0.50% TOTAL SERVICE TAX
ROOM ONLY 1.40% 0.05%  0.05% 1.50%
Other than above including TOUR PACKAGES and TRANSPORT 4.20% 0.15% 0.15%  4.50%
Those who are registered under TRANSPORT category 5.60% 0.20% 0.20% 6.00%
 
 Please note the following:- 
 
CENVAT Credit will be available only between tour operators to tour operators, 
CENVAT Credit will be available on Service Tax part and also on Krishi Kalyan Cess (KKC). 
KKC paid on eligible input services ( Tour Operator services) has to be utilised only against payment of corresponding KKC on output services of the tour operator.  
Swachh Bharat Cess to be shown separately as “SB Cess”. 
No CENVAT Credit will be available on the Swachh Bharat Cess.
Krishi Kalyan Cess to be shown separately.  More details will follow.  
Revised rates as indicated in the above table shall apply to invoicing made on or after 01.06.2016.
 
With best regards, 
 
Pronab Sarkar
Hony. Secretary