Service Tax on services rendered by Mandap Keepers and Air Travel Agents - Service Tax - 47/CE (Service Tax)/97

Attention of the Trade is invited to this office Trade Notices No. 43 to 46 (service tax)/97, dated 27-6-1997 through which it has been informed about the imposition of Service Tax on the services rendered by Mandap keepars and Air Travel Agents w.e.f. 1 st , July, 1997 in terms of Notifications, 19/97 to 22/97-ST, dated 26-6-1997 - Govt. of India, Ministry of Finance, Department of Revenue. 2. It is felt that some clarifications in respect of these two services given below for guidance of Public/Trade would be beneficial. 3. Mandap Keepers : 3.1 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 keeper 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 functions. 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 service tax will apply in all these cases. 3.2 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 keeper from the client for use of the mandap including the facilities provided to the client in relation to such use and also the charges for catering, if any. 3.3 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. 3.4 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. 3.5 Where a mandap keeper also provides catering services, that is supply of food, in addition to the letting out of the mandap and charges the customer for supply of food, an 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 (vide Notification No. 21/97 - service tax, dated 26th June, 1997) . This mainly happens in the case of hotels, clubs etc. 3.6 Some times 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 is raised by the mandap keeper to the client. 3.7 It may also be noted that in view of the definition of mandap as discussed in para 3.1 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. 4. Air Travel Agents : 4.1 As regards the services rendered by air travel agents, the person responsible for collecting the service 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. 4.2 It is understood that the air travel agents receives 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 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. 4.3 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 case of domestic tickets and 0.5% of the basic fare in the case of international tickets towards discharge of his service tax liability instead of paying tax at the rate of 5% on the actual commission received from the air lines. ( Notification No. 20/97-S.T. refers). Basic fare is defined as that part of the fare on which commission is payable by the air lines. It is reported that this normally does not include the passenger service fee and the taxes. However, this aspect may be verified by the Commissioners and action taken accordingly. 4.4 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 need not arise. No adjustment of commission for the period prior to 1st July, 1997 (when no service tax was leviable) will be made from the commission payable from 1st July, 1997 onwards. 5. General : 5.1 As per Section 69 of the Finance Act, 1994, read with Rules 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 26-6-1997 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 service tax in relation to the services 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. 5.2 Rules relating to service tax on other services have already been notified and the trade is advised to go through them. However, for the benefit of the services which are to be covered by the Notifications No. 19/97 to 22/97-ST, dated 26-6-1997, the procedured to be followed for registration, maintenance of documents, filing of returns and the manner in which the service tax is to be paid and which were contained in Chapter V of the Finance Act, 1994 , notified to the trade vide this Commissionerate Trade Notice No. 46-C.E. (Misc 46)/94, dated 7-7-1994 are reproduced along with annexures as amended from time to time and by the Finance Act, 1997. Registration : 5.4 The assessees will apply for registration in form ST-1 (annexure-I). An acknowledgement will be provided on the duplicate copy of the ST-1 form by the Superintendent of Central Excise (Service Tax) in Room No. 254, CR Building I.P. Estate, New Delhi. Registration No. will be allotted on receipt of their application. 5.5 Payment of Service Tax : Rule 6 of the Service Tax Rules, 1994 , deals with the payment of service tax. The Service Tax will be deposited under Head 0044, in form TR-6 in yellow colour as amended vide Service Tax Circular No. 17/11/96, dated 24-10-1996 (a copy of which is enclosed as Annexure - II) in any of the bank branches, at present authorised to collect Central Excise Duties within the jurisdiction of Commissionerate of Central Excise, Delhi. A list of such branches along with the codes Nos. (Annexure - III) is enclosed. It is to be noted that each assessee shall choose only one branch convenient to him and all payment shall be made in that branch only. 5.6 The concept of provisional assessment has been built into the scheme of service tax rules. Whenever an assessee, for any reason unable to correctly estimate on the date of deposit, the actual amounts collected for any particular month of period, the assessee may make a request in writing to the Asstt. Commissioner of Central Excise (Service Tax), CR Building, I.P. Estate, New Delhi to make a provisional assessment to the tax on the basis of the amount deposited. The said Central Excises Officer will, on receipt of such request, order provisional assessment of tax. In this regard, the provisions of Central Excise Rule 1944 have been made applicable. However, there is no requirement to enter into a bond in respect of service tax. 5.7 The Assessee will file the quarterly return in Form ST-3 as amended vide Notification No. 15/97, dated 25-4-1997 in (Annexure - IV) in triplicate. In respect of provisional assessment, the assessee is required to submit a memorandum in Form ST-3A (Annexure V) showing details of difference between the Service Tax deposited and the service tax actually collected for each month. The assessee shall submit quarterly return along with the copy each of form TR-6 for the months covered in the quarter. 5.8 The assessment shall be completed on the basis of the particulars furnished in the quarterly return ST-3 and ST-3A , by the said Central Excise Officer. The triplicate copy of the quarterly return so assessed shall be returned to the assessee with assessment memorandum. In cases where the service tax assessed is more than the service tax self determined and paid by the assessee, the assessee shall pay the deficiency along with the amount of interest determined thereon within 10 days of the receipt of the copy of the quarterly return from the Central Excise Officer. The assessee may apply for refund, whenever he has paid service tax in excess of tax assessed, in accordance with the provisions of Section 11B of the Central Excise Act, 1944. Appellate Mechanism : 6. Appellate mechanism provided in Central Excise Act, 1944 has been made applicable to Service Tax with some modifications. ( Section 85 and Section 86 ) of Finance Act, 1994 may be referred to). 7. Administrative Machinery for Collection of Service Tax : (1) A Service Tax cell has been created in the headquarters office of the Commissionerate of Central Excise, Delhi namely :- The Assistant Commissioner of Central Excise (Service Tax Cell) Commissionerate of Central Excise, Delhi Room No. 116, C.R. Building I.P. Estate, New Delhi-2 Tel. No. 3722048 and EAPBX 3317741, 43 Ext. 320, 310, 376. The Trade is advised to send all correspondences, applications for registration, returns etc. to the above address. (2) The trade may please note that (a) Application for registration in Form ST-I received form the assessee shall be acknowledged by an officer of the rank of Superintendent of Central Excise. (b) Certificate of registration in the Form ST-2 will be issued under the name and signature of the Assistant Commissioner. (c) The Service Tax collected during any calendar month by the Assessee under Sub-section (1) of Section 68 of the Finance Act, 1994 shall be paid to the credit of Central Government in Form TR-6 by the 15th of the following month. (d) Any person, responsible for collecting the Service Tax, who fails to collect the Tax in accordance with the provisions of sub-section (II), shall not withstanding such failure be liable to pay such tax to the credit of the Central Government with-in SEVENTY FIVE DAYS from the end of the month in which the service was rendered. (e) Quarterly return filed by the assessee (para 4.7 above) will be assessed by the Superintendent of Central Excise (Service Tax). (f) For the purpose of provisional assessment whenever the Asstt. Commissioner will make an order for provisional assessment for the tax, on request being received in writing from the Assessee. (g) The powers of Assessment under Sections 72, 73 , 74 of Chapter V of the Finance Act, 1994 dealing with best judgment Assessment, value of taxable service, escaping assessment, rectification of mistake will be exercised by the Asstt. Commissioner. In respect of Assessment periods of 5 years or more referred in Section 73 of the Finance Act, 1994 (32 of 1994) Commissioner will be the competent authority to excercise the powers.