17 January 2024

Facilitating booking of hotel rooms through online portal is covered under Tour Operator service – 90% abatement available

The CESTAT New Delhi has set aside a demand of service tax against a major online travel company which allowed the customers to book hotel rooms through its website/mobile application. The Revenue Department had alleged that the service was covered under ‘short-term accommodation’ service taxable under Section 65(105)(zzzzw) of the Finance Act, 1994 and not under ‘tour operator’ service under Section 65(105)(n).

Holding that the service was in fact covered as Tour Operator service, the Tribunal also allowed the benefit of abatement of 90% as per Notifications dated 1 March 2006 (till 30 June 2012) and 20 June 2012 (from 1 July 2012). The period involved was from May 2011 to June 2017.

Service covered under Tour Operator service

The Tribunal held that by providing booking of hotel rooms service to the hotel/customers through the online portal, the assessee merely acted as a facilitator between the hotel and the customers. It, for this purpose examined the relevant clauses of the ‘Privilege Partnership Agreement’ between the assessee (online portal) and the hotel, and the ‘User Agreement’ entered between the assessee and the customer (person booking hotel room).

Further, observing that the assessee only provided access to an online platform to the customer for ease of booking hotel and charged commission on the hotel for the same while paying service tax on such commission, the Tribunal was of the view that it cannot be urged that the assessee had rendered hotel accommodation service to the customers.

Also, going through Section 65(105)(zzzzw), the Tribunal noted that short-term accommodation service must be provided to any person by a hotel for providing of accommodation, and that the provision did not state that the service has to be provided to any person by any person. Further, the contention that the assessee cannot provide the service of short-term accommodation to the customers in the absence of requisite licenses, infrastructure and, therefore, the appellant cannot be said to be a hotel, was also accepted by the Tribunal. According to the Tribunal, the assessee was merely a booking agent and not an agent of the hotel, as evident from the various agreements.

Abatement of 90% available for facilitating online booking of hotel accommodation

Contention of the Department that even if it is taken that the assessee was providing Tour Operator service, in respect of services relating to booking of accommodation, the assessee would not be a tour operator and hence ineligible for the abatement of 90% under the notification, was also rejected by the Tribunal.

The Tribunal for this purpose noted that what was required was the qualification of a tour operator itself (qua the person), and not as the services rendered (qua transaction). Accordingly, it did not accept the contention of the Department that each transaction relating to the service that was provided had to be examined. The Tribunal in this regard took note of the definition of a ‘tour operator’ in terms of Notification No. 26/2012-ST, dated 20 June 2012 and held that the assessee engaged in the business of arranging tours, including accommodation through online portal would qualify to be a tour operator.

It was hence held that when a person otherwise was qualified as a tour operator but provided only booking of accommodation service, then such a tour operator was entitled to ninety percent abatement, subject to other conditions of the notification.

The assessee in Make My Trip (India) Private Limited v. Additional Director General, DG GST Intelligence was represented by Lakshmikumaran & Sridharan.

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