Online travel company MakeMyTrip is under probe for alleged service tax evasion of Rs 75 crore. The Directorate General of Central Excise Intelligence (DGCEI) has registered a case against the online travel services provider for allegedly not depositing service tax which it had collected from the customers, official sources said.
Following the probe, one of the company’s senior executives was arrested by the DGCEI officials and released on bail last week, they said.
When reached for comments, a company spokesperson said the service tax case is an industry issue and it will be contesting the case with appropriate authorities.
“At MakeMyTrip, we strongly believe in an ethical, transparent and compliant corporate culture and abide by all laws and regulations of the country. The service tax case in question is potentially an industry issue that can impact all Online Travel Agents (OTAs),” the company’s spokesperson said.
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“We have a strong case as advised by our tax advisors and, therefore, will be contesting the matter with the appropriate authorities. We are extending our full cooperation to the authorities in the investigation. Further, the company official who was detained by the authorities has already been released,” the spokesperson said.
Service tax is charged at the rate of 14.5% (including 0.5% of Swachh Bharat Cess). The DGCEI investigation has found that the company was collecting two types of taxes–service tax on 60% of the rate negotiated by MakeMyTrip with the hotels towards renting of rooms and service tax on 10% of the gross value on the customer vouchers by treating themselves as tour operators. The second category of service tax was being mentioned as Make My Trip Tax (MMT) by the firm, the sources said.
It is also found by the DGCEI that MakeMyTrip was depositing so-called MMT Tax and not the one collected from the customers towards renting of hotel rooms, they said.
MakeMyTrip has collected Service Tax to the tune of Rs 83 crore (approximately) from October 2010 to September 2015 from customers for taxable service of renting of hotel rooms out of which Rs 67 crore has not been deposited in the government account, the sources said.
The estimated alleged evasion of service tax by MakeMyTrip is about Rs 75 crore. The firm has so far deposited Rs 15 crore towards its anticipated service tax liability and has promised to deposit Rs 10 crore during the hearing of the bail application of its executive, sources said.