We are in the business of chartering of aircraft. We have obtained permit from the Director General of Civil Aviation (DGCA) to operate as a non-scheduled passenger carriage operator. We have learned that a clarification has been issued by the Central Board of Excise & Customs with respect to levy of service tax on chartering of aircraft. Please clarify.
The Central Board of Excise & Customs has issued directions to examine the applicability of service tax on chartering of aircraft under the service category of ?supply of tangible goods for use service?. The said taxable service category is defined as ?any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances?.
The CBEC had clarified that chartering of aircraft by a client only confers him with the right to use the aircraft and that there is no transfer of right of possession. Whether effective control over the aircraft is transferred or not is a question of fact. Where the crew is also provided by the owners of the aircraft, as in a wet lease of the aircraft effective control is not transferred.
Therefore, the CBEC had issued instructions to field formations to examine the facts of aircraft leasing to determine its taxability..
We are a service provider registered in Delhi. Recently, we received a letter from the service tax department asking us to provide information in a declaration form for Automation of central excise and service tax (ACES). Please clarify the purpose of ACES and whether we need to obtain registration under ACES.
ACES is a centralised, web-based software application which automates various processes of central excise and service tax for assessees and the department. Any assessee can register with the service tax department using ACES. In ACES, some processes such as registration, returns and refunds are automated. We understand that ACES enables online tracking of the status of applications and also provides other online facilities.
The service tax department in Delhi has issued letters to assessees requesting them to register themselves under ACES. We understand that currently registration under ACES is not mandatory. However, the the department is strongly advocating the use of ACES.
Please clarify whether Cenvat credit of input services, accumulated on account of low output service tax liability can be carried forward and if so, to what extent?
There is no provision under the service tax legislation specifying a timeframe or prohibition on availment (ie, recording as Cenvat credit in the books of accounts) and carrying forward the credit of service tax (including education cess and secondary and higher education cess) paid procurement of input services.
The courts have also held that the amount of credit is a valuable right to property which cannot be deprived. Accordingly, the Cenvat credit once availed does not lapse and can be carried forward. Therefore, all service providers should be eligible to avail and carry forward the service tax paid on procurement of input services, to utilise against its future output service tax liability.
We let out our hall for marriage, reception, social and business purpose. When we let out our hall to the customers we charge only for the food and not for the hall. VAT is paid on the bill for food provided by us. In this context, we have come to know that letting out our hall may attract service tax under the taxable service category of mandap- keeper?s services. Please advise whether we are liable to pay service tax on the above transaction under the service category of mandap- keeper?s services..
The activity of letting out hall for the purposes mentioned by you is covered under the taxable service category of mandap-keeper?s services. However, service tax liability arises in case there is a consideration for the service. Where the services are rendered for free no service tax liability can arise. Therefore, service tax should not be levied if you are able to prove that letting out of hall is free of cost.
However, the department may allege that food charges are inclusive of hall rentals and may ask you to pay tax on the food amount collected from the customers.
Assuming that service tax is leviable, you could avail the benefits of abatement under Notification 1/2006-S.T. (which specifies an abatement of 60% where the mandap-keeper also provides catering services and the bill is inclusive of such catering services).
Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice. Neither EY nor FE is liable for any action taken on the basis of these replies