| Article Section | |||||||||||
TAXABILITY OF AIRPORT SERVICES |
|||||||||||
|
|||||||||||
TAXABILITY OF AIRPORT SERVICES |
|||||||||||
|
|||||||||||
Service tax has been imposed on airport services rendered by airport authorities and persons authorized by it by the Finance Act, 2004 with effect from10th September, 2004. The gross amount charged to a person in relation to airport services is chargeable to service tax i.e., services provided by an Airport Authority of India (AAI) or its authorized person in an airport or a civil enclave. Meaning of Aircraft Section 65(3a) defines ‘aircraft’ as under — ‘aircraft’ has the meaning assigned to it in clause (1) of Section 2 of the Aircraft Act, 1934. Clause (1) of Section 2 of the Aircraft Act, 1934 defines ‘aircraft’ as under — ‘aircraft’ means any machine which can derive support in the atmosphere from reactions of the air, other than reactions of the air against earth’s surface, and includes balloons, whether fixed or free, airships, kites, gliders and flying machines. Meaning of Airport Section 65(3c) defines ‘airport’ as under — ‘airport’ has the meaning assigned to it in clause (b) of Section 2 of the Airport Authority of India Act, 1994. Clause (b) of Section (2) of the Airports Authority of India Act, 1994 defines ‘airport’ as under— ‘airport’ means a landing and taking off area for air crafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in Clause (2) of Section (2) of the Aircraft Act, 1934. Thus, according to definition, airport means and includes— — landing and taking off area (for aircrafts) — runways for landing/taking off — aircraft maintenance facilities — passenger facilities, and — aerodrome Meaning of Airports Authority Section 65(3d) defines Airport Authority as under: “airports authority” means the Airports Authority of India constituted under Thus, airport authority would mean Airports Authority of India (AAI) as constituted under Section 3 of the Airports Authority of India Act, 1994. Presently inIndia, AAI is responsible for providing airport service at all civil domestic and international airports in the country. The definition covers not only the AAI but also any authorized person who provides services at airports or civil enclaves. In cases where AAI has handed over the management of any airport or civil enclave to any person, such person in charge of management would also be covered in the definition of an airport authority. Meaning of Civil Enclave Section 65(24 a) defines a civil enclave as under : ‘Civil enclave’ has the meaning assigned to it in clause (i) of Section 2 of the Airports Authority of India Act, 1994. Clause (i) of Section 2 of the Airports Authority of India Act, 1994 defines civil enclave as under– ‘Civil enclave’ means the area, if any, allotted at an airport belonging to any armed forces of the union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area. Civil area would, therefore, need to meet the following tests — (i) It should be an area allotted at an airport (ii) Such airport should belong to any armed forces of the Union of India (iii) It should be used by person availing of – (a) any air transport services from that airport, (b) handling of baggage, or (c) handling of cargo. (iv) It includes any land comprising of any building or structure on such area. Taxable Service Taxable Service has been defined in Section 65(105)(zzm) as under — “Taxable service means any service provided or to be provided to any person, by Airports Authority or any person authorized by it, in an airport, or a civil enclave”. Amendment Made by Finance Act, 2010 Finance Act, 2010 has substituted classe (zzm) as under- “Taxable service means any service provided or to be provided to any person, by airports authority or by any other person, in any airport or a civil enclave. Provided that the provision of section 65A shall not apply to any service when the same is rendered wholly within the airport or civil enclave”. Taxable Service in case of airports services should satisfy the following tests – (i) airport service may be provided to any person (i.e., individual, firm, group of individuals, company, etc.). (ii) service should be provided by an Airport Authority or any other person authorized by AAI or person having charge of management of airport/civil enclave( by any person in airport or civil enclave, as amended by Finance Act, 2010) (iii) services should be provided in an airport or a civil enclave. (iv) services should be rendered for a consideration. Services provided in an airport or civil enclave, to any person by Airports Authority of India (AAI), a person authorised by it, or any other person having charge of management of an airport are taxable under this category. This includes variety of services provided to airlines, as well as for cargo and passenger handling such as security, transit facilities, landing, terminal navigation, parking and housing and route navigation facility. (Vide Circular No. 80 dated10-9-2004 — since withdrawn. Amendment Made by Finance Act, 2010 The new definition removes the condition that services provider should be airport authority it self or any person authorized by such authority in any airport or civil enclave. Following is the impact of the amendment-
CBEC Clarification CBEC has vide Circular No 334/1/2010-TRU dated 26.2.2010 clarified that the amendment made by Finance Act, 2010 seeks to consolidate all services provided in airport or civil enclave under one category. Following are the extracts- “1. Services provided in an airport or port 1.1 Two services, namely ‘port services’ and the ‘airport services’ were introduced in Budgets 2001 and 2004 respectively. The services provided by minor ports covered under ‘other ports’ became taxable from 2003. The purpose behind creating these services was that since a number of activities are undertaken within the premises of ports and airports, it would be easier to consolidate all such services under one head. 1.2 It was reported that divergent practices are being followed regarding classification of services being performed within port/airport area. In some places, all services performed in these areas [even those falling within the definition of other taxable services] are being classified under the port/airport services. Elsewhere, individual services are classified according to their individual description on the grounds that the provisions section 65 A of Finance Act, 1994 prescribes adoption of a specific description over a general one. 1.3 Further, both the definitions use the phrase ‘any person authorised by port/airport’. In many ports/airports there is no procedure of specifically authorizing a service provider to undertake a particular activity. While there may be restriction on entry into such areas and the authorities often issue entry-passes or identity cards, airport/port authorities seldom issue authority/permission letters to a service provider authorising him to undertake a particular task. Many taxpayers have claimed waiver of tax under these services on the ground that the port/airport authority has not specifically authorised them to provide a particular service. 1.4 In order to remove these difficulties, the definitions of the relevant taxable services are being amended to clarify that all services provided entirely within the port/airport premises would fall under these services. Further, specific authorisation from the port/airport authority would now not be a pre-condition for the levy.” Value of Taxable Service As per Section 67, the value of taxable service in relation to airport services provided to any person by AAI or its representative was the gross amount charged from that person. Gross amount meant the gross amount charged without any deduction of expenses incurred in rendering/providing the service and without any abatement from the taxable value. The value of taxable services would include landing charges, terminal navigation charges, parking and housing charges and route navigation facility charges. It would be on the gross amount chargeable by AAI or other such authorised person. Thus, charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax. However, in case a part of airport/civil enclave premises is rented/leased out, the rental/lease charges would not be subjected to service tax, as the activity of letting out premises is not rendering a service. (Vide Circular No. 80 dated10-9-2004) The cost of material or goods sold to service users shall not form part of value of taxable service. In Cochin International Airport Ltd. v. CCE, Cochin (2007 -TMI - 2431 - CESTAT, BANGALORE), in case of airport services, user fee collected from outgoing international passenger was held to be not taxable to service tax as nexus between user fee and services provided was absent. The collection of user fee was also struck down by Kerala High Court as not sustainable. In CCE v Cochin International Airport Ltd 2009 -TMI - 34974 – (KERALA HIGH COURT), where a flat user fee was collected from outgoing international passengers and its purpose was only to augment revenue and not for any service rendered to outgoing international passengers, it was held that collection of user fee was not far any specific service rendered and such amount can not be considered as service charge, more so as it was not being collected from inbound passengers. In P.C. Poulose v. Commissioner of Customs & Excise (Appeals), Cochin 2007 -TMI - 4173 – (CESTAT, BANGALORE), where appellant was only a collecting agent, it was held that charges collected as airport admission ticket charges (entrance charges) were not liable to service tax. Airport authority being the actual service provider was held to be the person liable to pay service tax as a person who simply collects entrance fee can not be equated with service provider. Royalty charges collected for ground handling, exchange facilities etc shall be taxable. Similarly, license fee collected from or for advertisers, cargo agents, car parking, shops, garbage disposal, telephone facilities, catering facilities etc shall be taxable. Specific Exemption Taxable service provided by an aircraft operator in relation to export of cargo by aircraft vide notification No. 28/2004-ST, dated 17-9-2004, withdrawn vide Notification No. 10/2005-ST dated 3-3-2005 but again restored vide Notification No. 29/2005-ST dated 15-7-2005. Person Liable Airports authority or any person authorized by it shall be liable to pay service tax and shall be treated as an assessee for service tax purposes. = = = = = = = = =
By: Dr. Sanjiv Agarwal - January 28, 2011
|
|||||||||||
| |
|||||||||||
