Service Tax on Tatkal Tickets by Indian Railways - Naturally Bundled in ordinary course of business?
YESTERDAY, DDT had reported about the investigation by Delhi Service Tax against the Indian Railways for allegedly not paying Service Tax on Tatkal tickets, cancellation charges and Bedrolls.
Now the whole issue seems to be whether these activities are part of naturally bundled services in the ordinary course of business.
IRCTC as well as Indian Railways are collecting and paying Service Tax on Tatkal and Premium Tatkal Charges assuming it to be a part of bundled service. Service Tax on these Charges is computed and recovered from the passengers assuming it to be a part of bundled service.
Department's contention seems to be that:
Bundled Services are those services which are naturally linked to each other and provided together without recovering the charges separately for any other service. However, once the Tatkal/ Premium charges for the berth have been recovered separately and they are in fact optional in the sense that the berths at the same time can be booked without paying these charges in the same train though waitlisted ticket will be issued, they can't be said to be naturally bundled service. Hence, Service Tax on it is required to be paid at full rate i.e. 14.5% (12.36% earlier).
Railways are collecting and paying Service Tax on Bed Roll Charges assuming it to be a bundled service for all trains. Once the charges for bed roll have been recovered separately and they have been optional, they can not be said to be naturally bundled service. Hence, Service Tax on it is required to be paid at full rate i.e. 14.5% now (12.36% earlier).
Are these services bundled or independent? That is the question which will determine whether they are eligible for abatement. Who will win - Revenue or Railway? Whoever wins, the citizen is sure to lose.