The Central Board of Excise and Customs (CBEC) on Tuesday exempted the levy of service tax on 60% of gross amount charged for transport of passengers by tour operators.

The exemption will however be valid only for the period from April 1, 2000 to February 4, 2004 and would not cover other services provided in the package tour.
 
The move comes in the wake of representations from tour operators demanding that service tax should be charged only on the commission earned instead of the original system of paying service tax on 100% of the gross amount charged.

The finance ministry has already provided abatement of 90% from gross value of taxable service other than packaged tours from February 5, 2004.

Tour operators have been demanding that the abatement levels for in-bound tour packages should be increased from the existing 60% to 90% as it would increase competitiveness of the Indian tourism industry in the world market. They had also approached the Abatement Committee in the ministry of finance to resolve the issue.

At present, tour operators pay service tax based on the service they offer. Transport services are taxed at 4.08% of total bill. Levy of service tax on tour operators was introduced from 1997-98 along with 11 other services.