GST dept's service tax crackdown continues, searches payments firm EbixCash

The Goods and Services Tax (GST) department has conducted searches at the office of global payment company Ebix in Mumbai last week, the latest in a series of such actions on an issue on which industry and the department have a different interpretation of rules.

A senior GST official told Moneycontrol that the searches yielded information on transactions on which tax up to Rs 20 crore may have been evaded, noting that they related to EbixCash, the Indian subsidiary of Nasdaq-listed Ebix that was formerly known as ItzCash. Ebix acquired ItzCash for Rs 800 crore in May last year and renamed it EbixCash.

Ebix facilitates on-demand software and e-commerce services to the insurance, financial, and healthcare industries. EbixCash’s portfolio of services include money remittance (domestic and international), travel, prepaid and gift cards, and utility payments.

A mail to the company seeking comment went unanswered at the time of publishing this story.

Industry experts say the payments industry and the GST department have been at loggerheads on the interpretation of GST rules.

“This is a matter of interpretation,” said the senior executive at a business correspondent firm, requesting anonymity for fear of antagonising the tax department.

“Usually, a bank pays taxes on the value it derives from the services it charges the customers. As per regulations, the bank gets the payment of service charged from the customer. But often banks have a contract or deal with the banking correspondents and a part of the payment is received by the BCs, on which the banks will not pay the tax,” the executive said.

But the GST department appears to have little sympathy for the industry’s protestations.

Over the past few months, it has aggressively pursued money transfer firms and private banks offering remittance services on charges of unpaid service tax in the years preceding to the introduction of GST. In case of Ebix too, the transactions pertain to ItzCash and for a period prior to its acquisition. India adopted GST in July last year.

Last week, Moneycontrol had reported that four firms offering remittance services were being probed by the GST department for alleged tax evasion.