Tour operators will now be required to pay only 25 per cent Service Tax as against 40 per cent of the gross amount charged on package tours.
This reduction in Service Tax on tour packages has been made effective with the Central government increasing the rate of abatement to 75 per cent for the purpose of levy of Service Tax on taxable services provided by tour operators in relation to package tours.  
The Finance Ministry has issued a notification reducing the Service Tax on package tours.
Services provided by tour operators, in relation to a tour, are leviable to service tax under the Tour Operators Service. At present, the tour operator, providing package tours which includes provision of transportation, accommodation for stay, is liable to pay service tax on 40 per cent of the gross amount charged for such tours. 
In other words, 60 per cent of the gross amount charged is provided as abatement for the purpose of levy of service tax.
The Indian Association of Tour Operators (IATO) made a representation to the Finance Ministry to increase the rate of abatement on package tour services provided by tour operators.  
The suggestion was also recommended by Ministry of Tourism. The request of the IATO was examined by the Advisory Committee on Service Tax Abatement and the Committee has recommended to prescribe the rate of abatement of 75 per cent on package tours where the gross amount charged includes cost of accommodation, food, transport arrangement, tourist guide, entry to monuments and other similar categories of expenditure.  
The recommendation was accepted by the Government and a notification prescribing abatement rate of 75 per cent to services provided by tour operators in relation to a package tour wherein cost of accommodation, food, transport arrangement, tourist guide, entry to monuments and other similar services are included as part of the package tour has been issued.