The Hindu Business Line : Tour operators seek relief on service tax on in-bound packages

FACED with eroding competitiveness in world markets, Indian tour operators have now sought relief on the service tax payable by them on in-bound tour packages.

The Indian Association of Tour Operators (IATO), which represents the interests of tour operators, has now approached the recently-set-up Abatement Committee to review the quantum of abatement on the package value for in-bound tours for service tax purposes.

The association has submitted that the abatement levels for in-bound tour packages should be increased from the existing 60 per cent to 90 per cent.

"Our packages for in-bound tours would become cheaper if the abatement levels are enhanced to 90 per cent. At the present 60 per cent abatement levels, our packages are not competitive in the global market. As a result, business is getting diverted to other foreign tour operators," the Associations' Senior Vice-President, Major Murli Dhar, told Business Line.

If the abatement level is enhanced, the IATO feels that they could bring down the cost of in-bound packages, thereby, increasing international tourist arrivals into the country.

The IATO's earlier attempts to obtain service tax exemption on in-bound tour packages did not bear fruit as the Government was not in favour of granting such an exemption.

The Abatement Committee was set up in the first week of May this year as an advisory committee to advise the Government on the extent of abatement for both excise duty and service tax.

The Member (Central Excise) of the Central Board of Excise and Customs (CBEC) has been appointed as the Chairman of the Committee. The CBEC member in-charge of service tax has been appointed as the co-chairperson of the committee.

The Finance Minister, Mr P. Chidambaram had in the Budget speech for 2005-06 proposed the setting up of an advisory committee on abatement for both excise duty and service tax.

The Minister had then underscored the need for more transparency in the system for quantifying the abatement. He had also said that there should be a mechanism to review the rate of abatement to reflect the changed circumstances.

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