Kingfisher faces tax audit claim of Rs120 cr

Mumbai: India’s second largest private carrier by passengers carried, Kingfisher Airlines Ltd, had wrongly availed of Rs120 crore in Central-value added tax (Cenvat), credit on certain non-eligible services, the service tax department in Mumbai has found.
The agency, a wing of the Central Board of Excise and Customs (CBEC), had conducted an audit of the carrier in September, a service tax official said, asking not to be named. It conducts such audits to improve compliance with service tax norms and detect instances of tax evasion.
Airline operators pay service tax to vendors for services such as maintenance and repairs of aircraft. To avoid double taxation, the government allows domestic airlines to avail Cenvat credit on service tax incurred for procuring goods and services that are extended to customers.
According to the audit report prepared by the agency, Kingfisher Airlines had wrongly availed Cenvat credit on certain input services that were used to provide non-taxable services. Cenvat credit is allowed only on those input services that are used for taxable services. “Following the audit, the firm has paid Rs31.7 crore to the department,” said Atul Saxena, joint commissioner, service tax department. This has reduced Kingfisher Airlines’ prospective liability to Rs88.3 crore.
Mint has reviewed a copy of the planning cell report that has details on the Cenvat credit availed by Kingfisher. The report was approved by the service tax commissioner, Mumbai, on 11 November.
Prakash Mirpuri, vice-president of corporate communications, UB Group, which owns Kingfisher Airlines, denied the firm has raised a tax liability of Rs120 crore—it is “wrong and absolutely incorrect”—or paid about Rs30 crore to the service tax department.
02/12/09 Khushboo Narayan and P.R. Sanjai/Live Mint

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Categories: Kingfisher Dec 2009