Passenger Service Fee and Airport Tax excluded from taxable air transport value when separately shown as statutory levies.

Passenger Service Fee and Airport Tax collected separately by an airline were not includible in the assessable value of air passenger transportation service for service tax purposes. The Tribunal applied Rule 6(2)(v) of the Service Tax (Determination of Value) Rules, 2006, which excludes taxes levied by any Government on air passengers when shown separately on the ticket or invoice. As these amounts were statutory levies collected under the Airports Authority of India Act, 1994 and the Aircraft Rules, 1937, and were separately indicated on tickets, the service tax demand on that component was not sustainable.

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Issues: Whether Passenger Service Fee and Airport Tax collected by the airline were includible in the assessable value of the taxable service of transportation of passengers by air for levy of service tax.

Analysis: The dispute was covered by earlier Tribunal decisions holding that Passenger Service Fee and Airport Tax are statutory levies collected separately and do not form part of the value of the taxable air transport service. Rule 6(2)(v) of the Service Tax (Determination of Value) Rules, 2006 excludes taxes levied by any Government on passengers travelling by air when shown separately on the ticket or invoice. The charges were found to be collected under the Airports Authority of India Act, 1994 and the Aircraft Rules, 1937, and were separately indicated on the tickets. The exemption notification relied upon also supported exclusion of such statutory taxes from taxable value.

Conclusion: Passenger Service Fee and Airport Tax were held not includible in the assessable value, and the demand of service tax on that component could not be sustained.

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