Aggregator service - A student's guide
We all are familiar with e-commerce companies like Flipkart and Amazon which act as a platform for customers like us to purchase the goods we want from a variety of brands available. We also are keen to book tickets on makemytrip the moment we finalize a family tour. As a finance student, have you ever wondered the nature of service these companies provide? These service providers are called aggregators.
Previously there were doubts and disputes regarding taxability of aggregators since who is the service provider and who is the service receiver were points of disagreement. Once the aggregator services were brought in the service tax net by virtue of amendments in Service Tax Rules, 1994, the matter has been laid to rest. The Service Tax Rules define an aggregator as a person, who owns and manages a web-based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.
Let us break up the definition:
• Aggregator should be a person as per definition under Finance Act.
• It should own and manage a web-based software application.
• Enable a customer to connect with service providers.
• Service provider should provide service under a brand name or trade name of aggregator So when we book an air ticket of Indigo (service provider) via makemytrip, we are connected to Indigo through makemytrip (aggregator) by means of web-based software application and a communication device (Internet and mobile). Other examples of aggregators include Flipkart, Amazon, Uber, Ola, Airbnb etc.
As per Service Tax Rules, in relation to service provided or agreed to be provided by a person involving an aggregator in any manner, the aggregator of the service shall be the person liable to pay service tax.
Provided that if the aggregator does not have a physical presence in the taxable territory, any person representing the aggregator for any purpose in the taxable territory shall be liable for paying service tax;
Provided further that if the aggregator does not have a physical presence or does not have a representative for any purpose in the taxable territory, the aggregator shall appoint a person in the taxable territory for the purpose of paying service tax and such person shall be liable for paying service tax. It is important to mention that under Notification No. 30/2012-ST as amended by Notification 7/2015-ST dated 1.3.2015, service tax for services provided or agreed to be provided by a person involving an aggregator in any manner shall be payable under reverse charge mechanism.
CAclubindia
