Mumbai: The anti-evasion wing of India’s service tax department last week issued a show-cause notice to state-owned National Aviation Co. of India Ltd (Nacil), which runs Air India, asking for an explanation about the non-payment of around Rs100 crore service tax on the special flights it operates for the Haj pilgrimage.
According to data from the ministry of civil aviation, the total cost of the airline’s Haj operations in 2008 was around Rs847 crore, of which Rs147 crore came from 15-year-old fixed fares of Rs12,000 per pilgrim, while the rest is subsidized by the government.
The show-cause notice comes at a time when the cash-strapped Nacil is seeking up to Rs15,000 crore in bailout funds from the Union government for fiscal 2010, nearly four times the amount sought last year; the airline is likely to post a loss of at least Rs4,000 crore in 2008-09.
A show-cause notice is not an indictment, and only requires the company, in this case Nacil, to explain its position, typically within a month.
According to an official at the service tax department, the service tax liability pertains to non-scheduled air transport of passengers from India to an international location. The official asked not to be named because he is not the official spokesperson for the department.
Under service tax regulations, non-economy class international journey is a taxable service. Any aircraft operator that provides scheduled or non-scheduled transport in any class other than economy must pay the service tax. There is no economy class in aircraft meant for non-scheduled transport of passengers.
Nacil is the coordinator for Haj operations. On behalf of the government, Nacil also leases planes and handles other logistics operations.
“Nacil is just a coordinator for the Haj operations for the government. Normally, the government used to reimburse the expenses incurred by Nacil. In this case also, if there is any tax liability, the government will handle it,” said a senior Nacil executive, who did not want to be identified. He also confirmed that Nacil had received the show-cause notice. A Nacil spokesperson declined comment.
The Haj is a pilgrimage to Mecca, and every Muslim is expected to make the pilgrimage at least once in his or her life.
In an unrelated development, Mint reported last week that the Directorate General of Central Excise Intelligence had issued a show-cause notice to Jet Airways (India) Ltd over the alleged non-payment of service tax on services availed overseas.