The Directorate General of Central Excise Intelligence (DGCEI) has reportedly registered a case against online travel company MakeMyTrip for an alleged service tax evasion of around Rs 75 crore.
The DGCEI officials also arrested a senior executive of the online travel portal last week. The executive was later released on bail, PTI reported citing sources.
According to the investigations conducted by the DGCEI, the company was collecting two types of taxes: a service tax on 60% of the rate MakeMyTrip negotiated with hotels for renting out rooms, and a service tax on 10% of the gross value being charged on customer vouchers. The company was believed to be mentioning the second category as MakeMyTrip (MMT) Tax.
A service tax is the tax levied by the government on service providers on certain transactions, but is generally borne by the customers. However, in this case, the DGCEI found the company was depositing the 10% of the gross tax and not the one it had collected from customers for renting of hotel rooms, sources said.
On the other hand, a company spokesperson told the Press Trust of India the service tax case was an industry issue and the company would be consulting the 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). We have a strong case as advised by our tax advisors and therefore will be contesting the matter with the appropriate authorities. Further, the company official who was detained by the authorities has already been released," the spokesperson said.
In India, service tax is charged at a rate of 14.5%. During a five-year-period from October 2010 to September 2015, the company had collected Service Tax worth Rs 83 crore, of which Rs 67 crore had not been deposited to the government's account, PTI quoted a source as saying.
The company has promised to deposit Rs 10 crore during the bail hearing of its executive.
Last week, the company announced that China-based travel website Ctrip.com had invested $180 million in MakeMyTrip via convertible bonds, which would allow the Chinese firm to own 15-16% stake in the company.
Queries from IBTimes India to MakeMyTrip went unanswered.