OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE
115, M.K. ROAD, CHURCHGATE, MUMBAI-400020
(SERVICE TAX CELL)
TRADE NOTICE NO. 6/97-SERVICE TAX DT. 1.7.97
SUBJECT: Imposition of service tax on services rendered by Mandap keeper and by an Air Travel Agents reg.
1. Attention of the Trade/Public and all concerned, is invited to Section 88 of the Finance Act, 1997 which provides interalia for levy of service tax on services rendered by Mandap these services will come into force from 1.7.97 (Notification No. 19/97-Service Tax dt. 26.6.97 referred) Notification 20/97-Service Tax dated 26.6.97 has been issued to define the person responsible for collecting the Service Tax in relation to Air Travel Agents and Mandap keepers.
2. MANDAP KEEPERS
In the context of these two services, certain points have been raised for clarification which are discussed below:
2.1 As per clause (19) of Section 65 of the Finance Act, 1994, "Mandap" means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein, let out for consideration for organising any official, social or business function. "Mandap Keepers" has been defined as " a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function". It may kindly be noted that the definition of mandap is very wide in its coverage and covers all immovable properties let out for organising social, official or business function. It includes within its scope places like kalyana mandaps or marriage halls, banquet halls, conference halls, etc. Hotels and restaurants providing any such facility within their premises for organising any social, official or business function shall also be obviously included in the coverage of service tax. Therefore, the levy of the service tax will apply in all these cases.
2.2 The taxable service has been defined as services rendered to a client by mandap keeper in relation to the use of mandap in any manner including the facilities provided to the client in relation to such use and also services, if any rendered as a caterer and the value of the taxable service means the gross amount charged by the mandap including the facilities provided to the client in relation to such use and also the charges for catering, if any.
2.3 A number of points have been raised by the associations representing mandap keepers with respect to the levy of service tax on their activities. These are discussed in the ensuing paragraphs.
2.4 The person responsible for collecting the service tax will be "mandap keeper". The service tax would fall not only on the hire charges for the mandap but also charges for electricity, whether on actual basis or otherwise, charged to the customer. therefore, it may be ensured that the tax is collected on the whole amount even if separate bills are issued one for the rental and the other for electricity charges. The mandap keeper may also bill the client for other services rendered by him such as charges for providing furniture, fixtures, lighting fittings, vessels, crockery, cutlery, etc. all these charges are includible in the value of taxable service for the levy of service tax.
2.5 Where a mandap keeper also provides catering services, that in supply of food, in addition to the letting out of the mandap and charges the customer for supply of food, and abatement of 40% of the total amount charged has been provided while computing the value of the taxable service. This will be deemed to be the value of taxable service in such cases. In other words, service tax will be leviable on 60% of the total amount billed in such cases (vide notification No. 21/97-Service Tax, dated 26th June, 97). This mainly happens in the case of hotels, clubs etc.
2.6 Sometimes it may happen that the booking made for the mandap is subsequently cancelled. In such cases, the question of levying service tax does not arise as no service has been rendered. It may kindly be noted that the tax has to be paid not at the time of booking of the mandap but when the service is actually rendered and the bill raised by the mandap keeper to the client.
2.7 It may also be noted that in view of the definition of mandap as discussed in para 2.1 above, even if the mandap is located or situated within the premises of any public place of worship such as temple, church, etc. and charges are collected for letting out of the mandap, the tax would be applicable.
3. AIR TRAVEL AGENTS
3.1 As regards the services rendered by air travel agents, the person responsible for collecting the services tax will be the air travel agents and the measure of the tax is the commission received by the air travel agent from the air lines for booking of air tickets.
3.2 It is understood that the air travel agents receive certain commission for domestic tickets and for international tickets from the airlines. The details of the commissions payable by the air lines is indicated in the agency agreement entered into between the air line and the air travel agent. the travel agent files a fortnightly return to the airlines indicating the details of tickets booked, the fare collected the commission earned along with other particulars. After the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the air lines. This fortnightly return could be made the basis for assessment of service tax in respect of air travel agents.
3.3 However, an option is also being provided to the air travel agent to pay the service tax at the rate of 0.25% of the basic fare in the acse of domestic tickets and 0.5% of the basic fare in the case of international tickets towards discharge of his service tax liablity instead of paying the tax @ 5% on the actual commission received from the air lines. (Notification No. 20/97-ST refers). Basic fare is defined as that part of the fare on which commission is payable by the air lines.
3.4 Cancellation or modification of tickets is a very common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the service tax is paid on the net commission received, the question of separately claiming refund of service tax may not arise. However, care may be taken to ensure that no adjustment of Commission for the period prior to 1st July, 1997 (when no service tax was leviable) is done from the commission payable from 1st July, 1997 onwards leading to escapement of service tax on the services rendered from 1st July.
4.1 As per section 69 of the Finance Act, 1994 read with rule 3 and 4 of the Service Tax Rules, 1994, every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under rule 3. Notification No. 20/97-Service Tax, dated 26.6.97 amends rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the services provided by an air travel agent shall be the air travel agent who books the passage for travel by air for a customer and the person responsible for collecting the service tax in relation to the services provided by a mandap keeper shall be the mandap keeper who raises the bill for services rendered to a client.
4.2 Section 67(2) of the Finance Act, 1997 provides that the service tax collected during a month shall be deposited to the Governmnet account by the 15th of the succeeding month. Section 68(3) of the Finace Act, 1994 as amended, provides that a person responsible for collecting the service tax who fails to collect such tax shall be liable to pay the service tax to the Government within 75 days from the close of the month in which their service was rendered. Section 76 further provides that in case of failure to pay the tax within the period of 75 days, the person responsible for collecting the service tax shall in addition to the tax and interest payable thereon be liable to pay a penalty.
4.3 Rules relating to levy of service tax on other services are already in existence. The procedure to be followed for the registration, maintenance or documents, filing of returns and manner in which the service tax is to be paid, is given below:
Every person in the jurisdiction of Mumbai-1 Central Excise Commissionerate who is responsible for collecting the Service Tax shall make an application to the Assistant Commissioner, Service Tax Cell, New Central Excise Building, 115, M.K. Road, Churchgate, Mumbai-400020 in Form ST-1 for registration. When an assessee provides taxable services from more than on epremises or office, he shall make separate application for registration in respect of each such premises or office.
When a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration. When a registered assessee ceases to carry on the activity for which he is registered he shall surrender his registration certificate immediately to the Central Excise authorities.
b). Payment of Service Tax
The Service tax collected during any calender month shall be paid to the credit of the Central Government by 15th or the following month in form TR-6 challan (yellow colour). For e.g. for the month of June 1997, it should be credited latest by 15th of July 1997. The head of account for the above two services will be intimated shortly. The amount of Service Tax be paid into the U.B.I. The list of authorised branches with Code Nos. is enclosed.
Any person responsible for collecting the service tax who fails to collect the tax shall. notwithstanding such failure, be liable to pay such tax to the credit of the Central Govt. Within 75 days from the end of the month in which the service was rendered.
c). Interest on Delayed Payment of Service Tax
If any person fails to pay or credit the Service Tax or any part thereof in time, he shall pay simple interest @ 1.5% for every month or part of a month ny which such payment/crediting of the tax or any part thereof is delayed.
d). Filing of Quarterly Return
A quarterly return in Form ST-3 (in triplicate) should be filed within 15 days of the end of the preceding quarter i.e. latest by 15th July, 15th October, 15th January and 15th April for the quarters ending June, September, December and March respectively.
e). Penalty for failure to collect or pay Service Tax
(i) If any person responsible for collecting Service Tax fails to collect such tax, he shall be penalized a sum equal to the amount of Service Tax which he failed to collect, besides paying the actual amount of tax and the interest thereon.
(ii) If any person, fails to pay the Service Tax to the credit of the Central Govt. in time after having collected the service tax, he shall pay a penalty of Rs. 100/- which may extend to Rs. 200/- per day during which such failure continues, besides paying the actual service tax and the interest thereon, However, the penalty in this case shall not exceed the amount of Service Tax that he failed to pay.
Note: the amount of Service Tax collected should be separately shown on the invoice for the service provided.
f). Penalty for failure to furnish the Quarterly Return
If a person fails to furnish the Quarterly Return (including "Nil" return) in Form ST-3 in time.i.e. by 15th July, 15th October, 15th January and 15th April for the quarters ending June, September, December and March respectively, he shall be penalized a sum of Rs. 100/- extendable to Rs. 200/- for every day during which the failure continues.
g). Penalty for suppressing value of taxable service
If any person is found concealing or suppressing the value of taxable service or has furnished inaccurate value, etc., such person shall be penalised a sum upto twice the amount of service tax sought to be evaded by reasons of suppression, concealment, etc. besides paying the actual service tax and interest, if any.
Apart from the above penalties, persons committing offences under Chapter V of the Finance Act, 1994 would also be liable to prosecution in certain cases.
Every assessee shall furnish to the Central Excise Officer at the time of filing his quarterly return for the first time a list of all accounts maintained by the assessee in relation to service tax including memoranda received from his branch offices.
5. The following Annexures are enclosed with this Trade Notice for the information of the tax-payers.
6. For further information, the Assistant commissioner, Service Tax Cell, can be contacted on 6th floor, New Central Excise Building, 115, M.K. Road Churchgate, Mumbai-400020. Telephone No. 2091599.
7. Associations of the Air Travel Agents and Mandap Keepers are requested to bring the above contents to the notice of their members.
SERVICE TAX CELL,
F.No. V(30) STC/15-55/97
Mumbai, the July 1997.
(Based on Ministry letter F.No.B 43/3/97-TRU dt. 26.6.97
Copy to : As usual