6 Service may be provided to any person

6.1
The Finance Act seeks to levy service tax on services provided by AA and persons authorised by AA to any person. Any person can be an individual or a firm or a company. Whether, any person will include AA incase it receives services from authorised person. To illustrate, AAI hires an agency for running of X-ray machine meant for scanning of passengers baggage. The agency charges a lump sum amount or amount calculated on the basis of scanned baggage. The question is whether agency is liable to pay service tax as service has been rendered inside airport. It appears that intend of the legislation is to levy service tax on services provided by AAI directly or indirectly through a authorised person, the agency being discharging the function of AAI, it cannot be subjected to tax under airport service. However, if such service, i.e. running of X-ray machine for a client, is otherwise taxable under a different heading, then agency has to pay service tax under that appropriate heading.

6.2
The Board has clarified that charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax under ‘airport service’ . The above clarification appears to be at variance with the intention of the legislation. AAI receives security services for safety and security of the airport which is a legislative mandate to the AAI under the AAI Act. In this case AAI or authorised persons are not providing any airport service, therefore they do not appear to be exigible to service tax under ‘airport service’. However, they are exigible to service tax under ‘Security service’. On the other hand, if an authorised security agency is providing a security service to an airline, it will be exigible to service tax under ‘airport service’.

6.3
Generally airport service may be provided to the following persons:
• Airlines
• Passengers in terms of utilities like telephone, booking etc
• Importers and exporters of goods
• Aircraft owners