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23 July 2021

Convenience fee charged by PVR from customers for online booking of movie tickets does not fall under OIDAR services CESTAT.

Recently, New Delhi-CESTAT, in the matter of PVR Limited vs. Commissioner of Services Tax, reported in [2021] 128 taxman.com 81 (New Delhi-CESTAT), held that convenience fee charged by PVR from customers for online booking of movie tickets does not fall under OIDAR services

The appellant is engaged in the business of exhibition of movies through various cinema halls located all over India. The appellant sells tickets for movies from the cinema ticket windows and also through its website www.pvrcinemas.com which is accessible through computer and mobiles phones. The website gives information on movies that are currently being exhibited in its cinemas, upcoming movies, trailers of movies and similar information. According to the appellant, no price is charged for accessing this website and any individual can access this website and gain information on movies that are being exhibited or would be exhibited in PVR cinemas. The customers who book tickets online through the website or through mobile phones electronically are required to pay an amount of INR 5/- to INR 25/- per ticket over and above the value of tickets. When the tickets are booked electronically, the hard copies of the same can either be collected over the counter or be retrieved by way of print out from a machine kept outside the counter of the movie hall.

The appellant received two show cause notice dated 14-6-2012 for the period 1-4-2007 to 31-12-2011 and notice dated 15-3-2012 for the period 1-1-2012 to 30-06-2012 alleging that the 'convenience fee' charged by the appellant on its customers for booking the tickets online through the website is exigible to service tax under 'OIDAR' but the appellant did not deposit service tax. The show cause notice also invoked the extended period of limitation and created a demand of Rs. 1,70,93,379/- and Rs. 31,37,767/- respectively with penalty and interest.

The appellant filed a reply on 13-9-2012 and 18-4-2013 refuting the allegations made in the show cause notice. The appellant submitted that service tax cannot be levied on convenience fee under OIDAR as the information provided on the website is available and freely accessible to all; that nothing is charged from the customers when it comes to giving access to the information; that the information available on the website is also available through newspaper advertisements or pamphlets; that the convenience fees is charged for the convenience provided to the customers for booking the tickets online rather than physically standing in the queue; and that the fees charged is only to recover the cost of infrastructure and bank charges.

However, both the aforesaid show cause notices were adjudicated upon by a common order dated 25-7-2014. The Commissioner confirmed the demand of service tax on convenience fee under the taxable service of 'OIDAR' primarily on the reasoning that the appellant provided online information to the ticket buyer on payment of monetary consideration called 'convenience fee' and, therefore, the claim made by the appellant that the information was provided free of cost is not true. The Commissioner also noted that the payment of the tickets were made through debit/credit card and after processing the same a booking number or code was allotted to customers through emails sent via computer network.

Appeals have been filed, by petitioner, to assail the order dated 25-7-2014 passed by the Commissioner with following submissions:

  • The underlying intention in the transaction entered into between the appellant and the customer is to confer a right upon a customer to enter a cinema hall and watch a particular movie. The contract is to facilitate the screening of movie to the customer and not to provide any access to information or database
  • Since the website of the appellant is used for sale of its tickets, it is in the nature of an e-commerce transaction
  • Convenience fees in question is charged only for 'booking of tickets and mere access to the website for information is free of cost;
  • Subsequent, Circular dated 9-11-2016 issued by the Board clarifies that booking services or tickets to entertainment events do not fall under the category of OIDAR services;

The revenue opposes the contention that consideration charged for "convenience fee" is clearly a charge for the information provided for online sale of cinema tickets. Further, it is submitted that data/information is provided online to the customers and convenience fees is charged only after the necessary information is obtained by the customers. It is his submission that the idea behind charging convenience fee is to charge for the "privilege" a customer gets for using the alternate service option

After hearing both sides, Hon’ble CESTAT-New Delhi decided the case in favour of the assessee. It ruled out that there is, no manner of doubt that the essential characteristic of the arrangement under consideration in these appeals is availing the facility of online booking of ticket and not accessing/retrieving any data/information. Service tax under the category of OIDAR, therefore, cannot be levied upon a user merely because he receives a code for getting a printout of the ticket from the cinema hall.