Dr. Sanjiv Agarwal
When you travel next by train, you will be pleased to see as a surprise, ‘Executive Lounges’ at railway stations, just like the ones at the airports which tempt you walk in and experience the whole new world of railway hospitality. But of course, at a price. We don’t have free lunches. Such Executive Lounges are being put up at various railway stations across the country, to start with, from bigger ones. These are being managed and / or operated by Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) or licensed by it.
Such lounge shall have facilities such as comfortable seating, meeting room, phones, wi-fi, F&B outlet, books, magazines, toilets with wash and change facility etc. There is an entry fee to the Executive Lounge which is Rs. 300 per person for a three hour usage and Rs. 125 per hour thereafter. Where such ‘Lounges’ are given on licence basis, IRCTC retains a fixed percentage towards licence fee form the gross billing, besides an annual concession fee, security deposit etc. The entry fee inclusive of all taxes for three hour usage of lounge. Besides this, wash and change facility will be a paid service @ Rs 175 per person which will include the cleaning material, toiletries, laundered bath / hand towels, tissue paper, liquid soap with dispensers etc provided by the Lounge.
Going by the scope of ‘service’, the activities of providing facilities to users of Executive Lounge at railway station is certainly a ‘service’ as it satisfies the tests of being an activity, activity is for a consideration, and activity is provided by one person to another person(s). Such activities are carried out for a consideration and appear to be satisfying the scope of definition of ‘service’.
In Service Tax, a ‘bundled service’ means a bundle of provision of various services where is an element of provision of one service is combined with an element or elements of provision of any other service or services. Accordingly, in case of bundled services, ‘if various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character’.
Lounge facility, thus, satisfies all the above indicators. Since a host of services viz, unlimited buffet comprising of food and beverages, wi-fi facility, reading facilities, viewing of television, lockers, toilets etc are provided for a composite consideration and any of such services are not available on stand-alone basis nor any rate concession is offered if some user uses / consumes only part of the services, As such, it appears to be a case falling under naturally bundled services in ordinary course of the business and have to be treated accordingly.
The Lounge charges Rs. 300 for three hours which, inter alia, includes services for supply of food and beverages, use of toilets, urinals etc. along with various other services. Though it appears to be a case of bundled services in terms of Section 66F of the Finance Act, 1994, even if we consider these facilities as paid and apportion some value to these specified services, it shall be covered under the exemption since it is provided with the objective of providing convenience to general public and hence exempt.
Wash and change facilities are also provided by the Lounge which is a paid service @ 175 per person which includes provision of cleaning material, toiletries including laundered bath/hand towels(white color only), tissue paper, liquid soap with dispensers etc. Accordingly, the facility of bathroom / washroom whether paid or not, shall also be exempt from levy of Service Tax.
However, since it is a bundled service, the taxability will have to be decided for the ‘bundle of services’ as a whole and not as split services because services it is a case of a natural bundle.