MIAL gets relief as tribunal rejects taxing development fee

What comes as a major relief to Mumbai International Airport (MIAL), the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted it a relief in the battle against the service tax department, reports CNBC-TV18's Ashmit Kumar.

The Service Tax department had, in 2011, sought to levy a 10 percent service tax on the Development Fee collected by the airport developer. The primary contention of the department was that the fee is collected for rendering services to passengers, and hence service tax could be levied on the collections. Consequently, the department had raised a demand of Rs 55 crore against MIAL. Also read: Don't see SC order impacting Jet-Etihad deal: CAPA CESTAT, in its order, however, differed from the stand taken by the department. The CESTAT held that fee helped promoters raise funds for upgradation and expansion, in compliance with the Airports Authority of India Act. CESTAT also held that the Fee was in the nature of a “cess” and that service tax could not be levied over such as fee. Having upheld MIAL’s petition, the CESTAT has remanded the matter back to the department for fresh consideration. This development, according to experts, is critical for settling the contentious, ongoing face-off between airport operators and the service tax department over the taxability of Development Fee. The service tax department had narrowed down on airport operators of Delhi and Mumbai over the levy of service tax. Reacting to the developments, GMR told CNBC TV18 that Delhi International Airport (DIAL) had been facing similar issues. GMR maintains that it is expecting relief, along the lines of CESTAT’s Mumbai bench order in favour of MIAL. GVK Power and Infrastructure closed for trade, higher by 18.81 percent. Meanwhile, GMR Infrastructure closed higher, for the day, by 1.34 percent.