5 Any service provided or to be provided is subject to service tax

5.1
The Finance Act seeks to tax all services provided inside the airport and civil enclave. No specific description of the service has been given in the Finance Act. As per section 22 of the AAI Act, AAI may (i) charge fees or rent (a) for the landing, housing or parking of aircraft or for any other service or facility offered in connection with aircraft operations (b) for providing air traffic services, ground safety services, aeronautical communications and navigational aids and meteorological services (c) for the amenities given to the passengers and visitors, and (ii) charge fees or rent from persons who are given by AAI any facility for carrying on any trade or business.

5.2
In view of the above, following services are usually provided inside the airport:
• facility for landing, housing or parking of aircraft
• air traffic services
• Ground safety services
• Aeronautical communications and navigational aids and meteorological services
• Repair and maintenance of aircraft
• Passenger scanning and frisking
• Baggage scanning
• Transportation of passengers and baggage from aircraft to terminals
• Import and export cargo handling, storage and delivery
• Warehousing
• Postal, telephone and telex service
• Ticketing, hotel booking, airport transfer
• Money exchange, insurance
• Catering of passenger in the airport lounge
• Duty free shopping, snack bar, book stall
• Entry in to airport and Viewers gallery
• Parking of vehicles, etc

5.3
As per explanation given in section 22(1)(a) of the AAI Act, "aircraft" does not include an aircraft belonging to any armed force of the Union and "aircraft operations" does not include operations of any aircraft belonging to the said force. Therefore, services given to an armed force aircraft does not fall within the ambit of taxable airport service.

5.4
Renting or leasing out of a part of an airport/ civil enclave or premises thereof is not deemed as rendering of service and therefore, will not be taxed . However, services rendered from therein will remain liable for service tax as the rented/leased property is still remains a part of airport/civil enclave and service will be rendered inside the airport/civil enclave. Telephone service, telex service, escort service, hotel booking service etc. provided by tenant/lease holder will fall within the mischief of airport service.

5.6
Sale of goods is not a service. Therefore, sale of goods/books/foods/snacks etc. by duty free shops, book stores, restaurants, kiosks, etc. are not subject to service tax. However, supply of food and beverage to the passengers by the restaurants/snack bar/kiosk inside airport against coupons issued by the Airlines may be considered as catering service subject to tax, for the reasons that (i) passengers get only those food and beverage which is decided by the Airlines and not as per their choice/menu card, (ii) payment is made by the Airlines to the restaurants/snack bar/kiosk and not by passengers themselves. On the other hand, if Airline purchases food and beverage from the restaurants/snack bar/kiosk situated inside airport and supply the same to passengers against coupons, it may not fall within the ambit of service tax, reason being that (i) for restaurants/snack bar/kiosk, it is a sell of goods to the Airline, and (ii) for Airline, it is a free service to the passengers. In this scenario, when supply of food and beverage to passengers is considered as service, it will be taxable under the category ‘airport service’ and not under ‘outdoor catering service’.

5.7
Supply of food packets to the Airlines by Air Caterers for in-flight catering of passengers falls within the ambit of port service and exigible to tax.

5.8
Cleaning, inspection, repair and maintenance of the aircraft are rendered inside airport; therefore these services are exigible to service tax under ‘airport service’.

5.9
AAI provides storage of the cargo in warehouses and charge rent for such storage. As these storage services are provided inside the airport, storage rent received by AAI or authorised persons is exigible to service tax under ‘airport service’.

5.10
It may be noted that any service includes each and every service rendered inside the airport or civil enclave, whether such service is otherwise taxable or not. It will also include all those service, which otherwise are exempted. Transportation charges paid on transportation of good for export are exempted from the levy of service tax. However, transportation charges paid on transportation of good for export inside the airport will be taxable under airport service without any exemption.