Tour and car rentals will become cheaper with the government easing service tax rules. Currently when a sub agent sells a tour package to a customer on behalf of an operator, service tax is being collected twice on the full tour cost (on sale of the tour to sub agent and to the customer) thus increasing the price for the consumer. Now the government has allowed travel agents to claim tax credit and end double taxation.
Finance minister Arun Jaitley announced in the budget "Service tax paid by sub-contractor in the same line of business would be allowed as eligible credit to the main service provider to avoid double taxation, subject to certain conditions.''
"Consumers will benefit from the move and packages will get cheaper. The applicable service tax rate is 12.36 percent but the government allows tax abatement for different services and effective rate for tours or hotel bookings works to around 3-5 percent. Now there will be a saving on this due to relaxation in rules,'' said Harmandeep Singh Anand, secretary general of Travel Agents Association of India which had demanded relaxation of rules.