M/s Crown Tours & Travels- (AAR-Raj) 2020 ITL (GST) 232

GST for various ancillary services provided by the applicant to tour operators is chargeable to GST @ 18%

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 as '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

• That 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.

• 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 as amended from time to time (hereinafter referred as 'Rate Notification'). 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.

• That whether the 'Ancillary Services' provided to various tour operators falls under Chapter heading 9985 (i) {Supply of Tour Operator Services} or 9985 (iii) {Support Services}? and what is the applicable tax rate for ancillary services provided to various tour operators?

Submission of the Applicant:-

• In the Rate Notification, the phrase Tour Operator' has been defined to mean: -
   "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 and includes any person engaged in the business of operating tours."

• That as per the definition of Tour Operator the same will include the person who provides services in the nature of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport. Thus, the definition of Tour Operator' clearly requires that such person must also provide transport services.

• Certain services as specified falling under Heading 9985(i) (i.e. tour operated services provided as a consolidated package) are leviable to GST @ 5%. That the services which are not qualified under the specified category of Supply of Tour Operator services, falls under the heading 9985(iii) i.e. other support services and are leviable to tax @ 18%.
• To determine whether the Applicant qualifies under Heading 9986(i) or 9985(ii), it is relevant to examine the meaning of the terms 'tour' and 'tour operator' for the purposes of the Rate Notification, and accordingly verify whether the Applicant falls within the ambit of such terms. The same has been discussed herein.

• It is humbly submitted that the meaning of term Tour' has not been defined in the Rate Notification, therefore, reference is made to the dictionary meaning of the term Tour'.
  
  As per dictionary, the term Tour' is defined as:
  Shorter Oxford English Dictionary pg. 3309 (5th Ed. Vol 2002) Tour: "A journey or period of travel from place to place esp. a holiday comprising visits to a number of places on a route through an area."
  Meaning of term 'Tour': Hence, Tour' means a travel from one place to another by any mode of transportation.

• 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, an 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. The definition of the Tour Operator as per Rate Notification also contains that the tours may include arrangements for accommodations, sightseeing and other similar services.

• In present case also, the Applicant takes the tourists in groups for local sightseeing, elephant or camel joy rides, lunch and dinner at local restaurant, boat ride, etc. The whole day of the tourist is spent/ utilized in the said activities and all the important tourist destination of the city are covered by the Applicant. The services provided by the Applicant are covered under sightseeing and other similar services. Thus, the Applicant provides the service of organizing and conducting a 'Tour' for the tourists.

• That in the Rate Notification, the term Tour Operator' has been defined as the person who is engaged in the business of planning, scheduling, organising, arranging tours by any mode of transport. Thus, as per the said definition the Tour Operator must provide the transportation service. It is humbly submitted that the Applicant is organizing the whole day trip in the present case and the said trip for the whole day consists of various activities which together constitutes as a Tour' of the city. Further, during local sightseeing the Tourists are taken from one place to another by mode of any transportation. The said transportation facility may be provided by the main tour operator. Thus, there is ambiguity as to whether the Ancillary Services provided by the Applicant falls under Tour Operator' services.

• Moreover, as per the Rate Notification, Tour Operator includes any person engaged in the business of operating Tours. The term 'business of operating tours' is very exhaustive and it will include any activity which are in the nature of incidental and ancillary to the business of operating tours like elephant ride, guide services, boat ride, local sightseeing etc. Also, the annexure to the said Rate Notification i.e. List of Services, provides for various activities under the head of Travel arrangement, tour operator and related services. All such activities which are mentioned under this head shall be construed as a part of business of operating tour and can be said to be supplying tour operator services. Hence, it is submitting that the Applicant in present case shall be construed to be supplying tour operator services.

• That as per the Rate Notification, the rate of 5% under Heading 9985(i) can be availed in following cases:
  i. ITC in respect of goods and services used in supplying the service has not been taken except in case where ITC is in respect of input services in same line of business i.e. Tour operator service procured from another tour operator,
  ii. The bill issued by the supply for this services indicates that it is inclusive of charges of accommodation and transportation required for such a tour and the amount charged in the bill is the gross amount charged for tour including the charges for accommodation and transportation required for such tour.

• That the condition no. (ii), the bill raised by the Tour Operator must be inclusive of accommodation and Transportation charges. Accordingly, a gross amount should be charged by the Tour Operator for the entire Tour. In present case, the Tour 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 main tour operator. Thus, the Applicant does not charge for the accommodation and transportation services as the same is not provided by the Applicant.

• That as per the Rate Notification, if the services provided by the supplier are not in the nature of services provided by Tour Operator', the said services will classify under Other support services having rate of 18%. Thus, if the services of the Applicant are not qualified as services provided by the Tour Operator' then the same will qualify as support services.

Observations of Authority:-

• In view of the definition of tour and tour operator, we find that supply of transport service in a tour package is very essential to classified as tour operator under GST Act. While examining the submissions of the applicant, we observe 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.

• To determine the classification and GST rate of the services supplied by the applicant, the relevant portion of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 (as amended) is as below:-

Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017

• While going through the above notification, we find 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, we observe 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.

• In view of the above discussions and provisions of law, the services provided by the applicant are not Tour Operator Service' but Support Services classifiable under Serial No. 23 [(SAC 9985(iii)] of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18% (SGST 9% + CGST 9%).

Ruling of the Authority:-

• 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).
• The applicable rate of GST for ancillary services provided by the applicant to various tour operators is 18% (SGST 9% + CGST 9%).