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[UPDATE] MakeMyTrip In Trouble Over Alleged Tax Evasion Worth ₹75 Crore

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UPDATE :

Here’s MakeMyTrip’s statement sent to The Tech Portal, on the issue,

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 OTAs. We have a strong case as advised by our tax advisors and therefore will be contesting the matter with the appropriate authorities. We are extending our full cooperation to the authorities in the investigation.

NASDAQ listed MakeMyTrip is in fresh troubles, as it now faces a probe for alleged service tax evasion worth Rs. 75 crore. The case has been registered by The Directorate General of Central Excise Intelligence (DGCEI) (via Livemint).

Sources aware of this entire episode told Mint, that the DGCEI has registered a case against the online travel services provider for not depositing service tax that the company collected from its customers. Following this probe, one of the senior executive of the company was arrested by DGCEI official but he is out now on bail. Service tax in India, is currently being charged at 14.5 percent.

During the investigation, it has been found that the company was collecting two types of taxes—service tax on 60% of the rate negotiated by MakeMyTrip with hotels for renting rooms and service tax on 10% of the gross value on the customer vouchers by treating themselves as tour operators.

The second type of tax that was being collected by the company was conveniently named MMT Tax. The company was depositing MMT Tax but not the one that was collected from users for renting rooms.

As per the officials, MakeMyTrip has approximately collected Rs.83 crore during the period of October 2010 to September 2015 for the taxable service of renting of hotel rooms. But, Rs.67 crore has not been deposited in the government account till date. The estimated alleged evasion of service tax by MakeMyTrip is about Rs.75 crore.

Commenting about this service tax case, MakeMyTrip’s spokesperson told LiveMint,

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. We are extending our full cooperation to the authorities in the investigation. Further, the company official who was detained by the authorities has already been released.

One of the official told PTI that the company has so far deposited ₹15 crore towards its anticipated service tax liability and has promised to deposit ₹10 crore during the hearing of the bail application of its executive.

MakeMyTrip had recently received $180 million investment from China’s Ctrip International, making it one of the biggest investments in travel space for an Indian company.

DGCEI has also conducted a detailed background check of some of the 30,000 hotels which have agreements with MakeMyTrip. So far the verification conducted of 490 hotels has found that 212 of them are not even registered with the service tax authorities.


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