SERVICE TAX RULES APPLICABLE FOR GENERAL SALES AGENCY OF AN INTERNATIONAL AIRLINE IN INDIA

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  1. Hi!
    Kindly explain the rules as to how a General Sales Agency for an International Airline in India should collect service tax from a passenger who purchases an international ticket.
    Example:
    Passenger A has paid Rs. 80000 to a General Sales Agency " A " of an Airline for purchasing an international return ticket journey starting from India.
    The base fare of the ticket is 7000o
    Taxes - Rs.8950 excluding service tax
    Total fare amount - Rs. 78950
    Service tax collected - Rs.1050
    Total amount paid to the agent is Rs. 80,000/-

    Passenger B has paid Rs. 78950 to another General Sales Agency " B " of the same International Airline in India for the same sector and same class of ticket.
    The base fare of the ticket is 7000o
    Taxes - Rs.8950 excluding service tax
    Total fare amount - Rs. 78950
    Service tax collected - Nil
    Total amount paid to the agent is Rs. 78950/-

    Wish to know as to how Service tax was not collected by the General Sales Agency "B" whereas other Agency collected.

    When checked with Agency A, passenger was informed that this the government service tax rule, 1.5% of base fare should be collected from the passenger.

    When checked with Agency B, as to why Service Tax is not collected but other agency has collected Rs. 1050, passenger was informed that we get commission 1% of the base fare i.e. Rs.700 from the Airline for the ticket sold on their airline. When the commission was not parted to passenger B by Agency B, how can we collect service tax from him/her. Had we parted commission at least 0.5% i.e. Rs.350 t0 passenger A, we would have collected Rs. 53/- from passenger A towards service tax. As we will be receiving Rs. 700/- from the airline, we will pay Rs.105 to the Government of India towards Service Tax on the commission amount received from the Airline for the services provided the passenger.

    Since the Agent A has not parted the commission to passenger A, they should not have collected Rs.1050 towards Service Tax. However, they have collected 1.5% of the base fare from passenger A towards service charge and received 1% commission from the Airlines in addition to over-riding commission 3% of base fare from the agent.

    Request clarity on this issue as both agents are getting 1% IATA commission in addition to 3% over-riding commission from the Airline, how agent A collected the service tax from the passenger A.

    I feel Agency B is an honest agent. What is your comments on this?

    Who followed the Service Tax rule correctly?
     
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