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Foreign airlines under scanner for alleged Service Tax evasion
July, 27th 2015

Six foreign airlines have come under the lens of revenue authorities here for alleged underpayment of Service Tax believed to be worth several crores.

An inquiry has been initiated by Directorate General of Central Excise Intelligence (DGCEI) officials against these airlines for allegedly not paying Service Tax of 12.36 per cent (now 14 per cent) on fee charged by them from customers on excess baggage, additional fare difference, date change, reissue of ticket, no show and refunds, official sources said.

Instead, they were paying Service Tax of 4.94 per cent on these services by wrongfully claiming 60 per cent abatement given to them under a 1994 amendment which is “in relation to transport of passenger by air”, they said.

The abatement is, however, available only on payment of Service Tax on basic fare and fuel surcharge.Therefore, the Service Tax on basic fare and fuel surcharge is to be charged at 4.94 per cent and not on other services including cancellation charges also, the sources said.

The airlines have been asked by the DGCEI to provide details like amount of Service Tax collected and paid under various heads, they said.

The alleged evasion may run to several crores.The exact quantification will be done as investigation progresses, the sources said.

Besides these airlines, the DGCEI officials have also requested data from International Air Transport Association (IATA), a trade association representing airline industry worldwide, they said.

The probe is not limited to these six groups and it will be expanded to cover many other foreign and domestic airlines, the sources said.

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