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Indirect Taxes
Service Tax - Statute Update
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Levy of Service Tax on
international journey by aircraft
Service tax is imposed by the
Finance Act, 2006 on “air transport of passengers embarking in India for
international journey, in any class other than economy class” w.e.f. 1-5-2006.
A question had arisen that if
a person undertakes air travel for return journey embarking from India from
Indian airport and pay return fare to the airline, what will be the value of
taxable service, whether the fare from India to other country or the return
fare. It was also debated whether a ticket issued from outside India for an
international journey commencing from India, is liable for service tax?
The Finance Ministry has
issued clarification by Letter F. No. 341/52/2006-TRU dated 17-10-2006
clarifying the issues as follows:–
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Issue |
Clarification |
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In case the international journey commencing from
Indian airport, involve stopover/ transfer at intermediate airports
outside India before reaching destination, whether service tax would be
leviable on full value or the value attributable to journey up to
first such stopover/transfer |
Service tax is leviable on the total value of ticket,
representing the consideration of a single composite service. |
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In case the international journey include travel in
domestic sector as a part of inter-national journey, whether service tax
is leviable excluding the value attributed to the domestic sector or on
the total value ? |
Service tax is leviable on the total value of the
ticket, treating the domestic sector as integral part of the
international journey. |
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In case of round trip/return ticket, whether service
tax is leviable on the total value of the ticket or only half value ? |
Service tax is leviable on the total value of the
ticket. |
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In case of journey commencing from an airport outside
India and completed at an airport outside India but including a
sector wherein passengers disembarks and subsequently embarks at Indian
airport as a part of international journey, whether service tax is
applicable ? |
No |
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Whether ticket issued outside India for
an international journey commencing from India is liable to service tax ? |
Yes, service tax is payable by the service provider
for the taxable service provided. |
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Place of purchase / issue of ticket is of no
relevance or consequence to determine the levy of service tax u/s. 65(105)
(zzzo) r.w. S. 66 |
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Service tax liability on
institutes like IITs or IIMs charging fees for campus
Interviews
The Ministry of Finance has
issued Letter F. No. 137/71/2006-CX.4 dtd. 1-11-2006 to clarify that the
education institutes like IITs and IIMs charge fee from prospective employers
for recruiting candidates through campus interviews. Up to 30-4-2006, since
only commercial concerns providing manpower recruitment or supply service were
covered, the institutes like IITs and IIMs providing recruitment service
through campus interviews by charging fees were not covered. They are however
liable to pay service tax for such services from 1-5-2006 upon removal of
words “commercial concern” from the definition of “manpower recruitment or
supply agency”.
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Large tax-payers
In tandem of other statutes,
service tax has now granted special benefits to the large tax-payers by
promulgating rules called Service Tax (Fifth Amendment) Rules, 2006 by
Notification No. 28/2006-ST dated 30-9-2006.
The large tax-payers will
have the meaning assigned to it in the Central Excise Rule, 2002.
The Rule 10 of the Service
Tax Rules, contains special procedure and facilities applicable to the large
tax-payers.
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