Service Tax on chartering of Aircrafts

Letter Dy. No. 20/Comm (ST)/2009, dated 9-2-2009


1. It has been brought to the notice of the Board that many non-scheduled operators engaged in the business of giving the right to use the aircraft to its customers (Chartering of aircraft) are not paying service tax. 

2. The issue has been examined in the Board. With effect from 16.05.2008, service provided to any person by any other person in relation to supply of tangible of goods including machinery , equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances is taxable service under Section 65 (105)(zzzzj) . Chartering of aircrafts by a client only confers him with the right to use the aircraft and the owner of the aircraft in such case does not transfer right of possession. As to whether effective control over the aircrafts is transferred or not would be a question of fact to be determined in each case. Where the crew is also provided by the owners of the aircraft as in a wet lease of aircraft effective control is not transferred. 

3. You may examine the facts of each case of aircraft leasing in your jurisdiction and take action to recover tax wherever due. A report in the present position of collection of service tax paid in chartering of aircrafts and the further action based on this reference may be sent to Director General ( Service Tax ).