 "Movie theatre (Photo - PTI)")
In a ruling last month, the Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has absolved BookMyShow, an online entertainment ticketing platform, from the obligation to pay service tax on transactions conducted through credit card companies.
Here's the deal: Sometimes, credit card companies offer discounts or rewards when you use their cards. This can create a difference between what a customer pays and what the movie theater or event organizer actually receives. The government argued BookMyShow should pay tax on this difference. But the court disagreed. They ruled that BookMyShow is simply acting as a collection agent for the credit card company's offer. Since BookMyShow doesn't keep any of the difference, they don't have to pay extra tax.
This is a big win for the online ticketing industry. It clarifies the tax situation for similar transactions and could potentially save other online ticketing platforms money. So, the next time you book your movie tickets online and pay with a credit card, you can enjoy both the convenience and potentially some tax savings thanks to this court decision!
BookMyShow's business model:
Acts as a middleman between customers and cinemas/event organizers.
Charges customers a ticket price + convenience fee for booking online.
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Pays the full ticket price to cinemas/event organizers.
BookMyShow pays service tax on the convenience fee they earn (the money they keep).
The dispute:
Between 2010-11 and 2014-15, BookMyShow earned Rs 52.78 crore from credit card companies (presumably processing fees).
The government argued BookMyShow should also pay service tax on this Rs 52.78 crore.
They issued a demand notice for Rs 6.33 crore in unpaid service tax.
BookMyShow's argument:
They act as a "conduit," simply passing on the ticket price to cinemas/event organizers.
They don't keep any portion of the ticket price, so shouldn't be taxed on it.
Essentially, the disagreement centered around whether BookMyShow should pay service tax on the total amount paid by customers (including ticket price), or just on their own convenience fee earnings.
BookMyShow's additional role:
Besides its primary function, BookMyShow also had agreements with credit card companies to offer discounts and free tickets to customers using specific cards. In these cases, the difference between what the customer paid and what the cinema received was covered by the credit card company, and BookMyShow simply facilitated the transaction.
The court's decision:
The government argued BookMyShow was providing a service to credit card companies by facilitating these discounts, and therefore should be taxed.
The court (CESTAT) disagreed. They said BookMyShow was just a facilitator, making the transaction process smoother for everyone involved (customer, cinema, credit card company). Since BookMyShow didn't keep any of the difference covered by the credit card companies, they weren't liable for tax on that amount.
Impact of the decision:
This is a significant win for BookMyShow and the online ticketing industry as a whole.
It clarifies how taxes are applied in similar situations and avoids potential future tax disputes for other online ticketing platforms.
"Upon thorough examination, CESTAT ruled in favor of BookMyShow, dismissing the service tax liability imposed by the revenue department. The tribunal emphasized that BookMyShow did not retain any portion of the funds received from credit card companies intended for cinema houses. Additionally, the platform’s role was determined to be that of a facilitator, rather than a service provider to credit card companies. As digital commerce continues to thrive, such legal precedents play a crucial role in shaping the future of e-commerce taxation," said NJ Jain and Associates in a note.
