Following the probe, one of the company's senior executives was arrested by the DGCEI officials and released on bail last week, they said.

When reached for comments, a company spokesperson said the service tax case is an industry issue and it will be contesting the case with appropriate authorities.

"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).

Service tax is charged at the rate of 14.5 percent (including 0.5 percent of Swachh Bharat Cess).

The DGCEI investigation has found that the company was collecting two types of taxes-service tax on 60 percent of the rate negotiated by MakeMyTrip with the hotels towards renting of rooms and service tax on 10 percent of the gross value on the customer vouchers by treating themselves as tour operators.

The second category of service tax was being mentioned as MMT (Make My Trip) Tax by the firm, the sources said.     

It is also found by the DGCEI that MakeMyTrip was depositing so called MMT Tax and not the the one collected from the customers towards renting of hotel rooms, they said.

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