Visa Facilitation Charges Collected by Travel Agent Not Taxable as Business Auxiliary Service: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that visa facilitation charges collected by a travel agency for assisting passengers in obtaining visas are not taxable under “Business Auxiliary Service” under the Finance Act, 1994.

A departmental audit of the travel agency was conducted. The financial records of the company revealed that it had collected visa and documentation charges from travellers and business entities for arranging Saudi Arabian visas through authorised agents of the Saudi Embassy in Mumbai.

The department viewed that the appellant-assessee, Arafaath Travels Pvt. Ltd was functioning as a “commission agent” and therefore providing taxable “Business Auxiliary Service” under Section 65(19) of the Finance Act, 1994.

Based on this allegation, the department issued a show cause notice demanding service tax exceeding ₹13 lakh for the period from 2008-09 to 2011-12.

Further, interest and penalties under Sections 76, 77 and 78 of the Finance Act were also imposed by the adjudicating authority.

The appellate preferred appeal before the Commissioner (Appeals). However, it upheld the demand. Thus, the company appealed to the tribunal.

During appellate proceedings, the assessee argued that it was providing visa assistance services directly to intending travellers and not on behalf of the embassy or any foreign employer.

It submitted CBEC Circular No. 137/6/2011-ST dated 20.04.2011, which clarified that visa facilitators assisting individuals directly for obtaining visas do not fall within the scope of taxable “Business Auxiliary Service.”

The assessee’s counsel R. Viswanathan, Chartered Accountant further submitted that it merely coordinated and facilitated the visa process for passengers travelling to Saudi Arabia. Although visas were issued by the Saudi Consulate through authorised agents in Mumbai.

It added that the service relationship remained directly between the travel agency and the passenger. Therefore, it could not be treated as an intermediary acting on behalf of the embassy.

The department, however, argued that the exemption under the CBEC circular applied only where visa facilitators dealt directly with visa applicants without involving embassy-authorised agents.

Since the assessee routed applications through authorised agents, the department claimed that the activity amounted to intermediary service taxable under Business Auxiliary Service.

After hearing the submissions, the bench of Ajayan TV (Judicial member) and M. Ajit Kumar (Technical member), referring to the decision of Green Channel Travel Services Pvt. Ltd., it was held that visa facilitators assisting individuals directly for obtaining visas are not liable to service tax under Business Auxiliary Service.

The Bench also noted the CBEC circular submitted by the assessee/appellant clarifying that visa facilitators merely assist individuals in completing immigration formalities and do not act as agents of embassies.

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