Be it hospitality, tourism or the entertainment industry; no one has escaped the hawk-eye of the Service Tax Department. Big conglomerates like Tata, Reliance, and Birla are likely to come under tax department’s scanner as notices to the tune of Rs 3,000 crore has been slapped at various entities, reports CNBC-TV18’s Aastha Maheshwari, quoting sources.
The taxman has also frozen a few accounts which have impacted the companies’ cash-flows.
Amit Kumar Sarkar, Director, Indirect taxes, says that these have occurred due to preponement of service tax payment over revised rules. Companies with credit cycle of 180 days and 12 percent liability have 80 percent of monthly sales have gotten blocked due to this. The outstanding tax is simply because the industry doesn’t have enough money.
Corporate India has challenged some of these demands. In some cases, it has sought further clarity on rules. For instance, Service tax liability on fees received by subsidiaries for services to group companies has come under question. It is true for groups like Tata Sons, AB Birla Group, and Reliance Industries. Taxability of fees charged by independent directors has also come under tax net.
Taxes on securitisation of transactions between banks and NBFCs have worried gold finance companies like Mannapuram, Muthoot and transport finance companies. Services provided by global reinsurance brokers with Indian offices like Lloyds or Marche is also under the taxman’s lens.
The tax department has a target of Rs 1.8 lakh crore for FY14 and is currently short of its target by 18 percent. This has been cited as the reason behind the its aggression in issuing notices.
It is also banking on its Voluntary Compliance Scheme (VCS) to help achieve its target.
Sheila Sangwan, member of CBEC says that they have already received 2200 declarations amounting to Rs 660 crore and is expected to double by December.
The notices have sent corporates pleading for relief from the government, who have made representations for lower service tax rates, allowances for tax adjustment against bad debt and changes in the Goods & Services Tax (GST) regime to the government over the past few months.