Tax evasion: Byju’s parent faces scrutiny by GST intelligence wing

After cab aggregators Uber and Ola, it is now the turn of the parent company of edtech firm Byju’s to come under the scanner of the intelligence wing of the Goods and Services Tax (GST) department for alleged tax evasion.

Think & Learn Private Limited (TLPL), the parent of Bengaluru-based Byju’s, is being investigated in two cases of alleged GST evasion to the tune of Rs 43 crore, according to show-cause notices issued to the company.

The GST department sent show-cause notices to the company on December 31, 2020 in connection with both the cases it has opened. Moneycontrol has reviewed the two show-cause notices.

The investigation pertains to the manufacture and sale of books, tablets and SD cards that Byju's provides its students, people familiar with the matter said. The GST department believes the unicorn failed to disclose information about these items, and thus attempted to evade paying taxes, one of the persons said, asking not to be named.

The intelligence wing of the GST department opened an investigation into the company for the period between March 2015 and June 2017. On July 2, 2018, the department had conducted searches on Byju’s premises and recovered a pen drive allegedly containing data relevant to its investigation.

Byju’s did not comment on detailed queries on this matter from Moneycontrol.

What the notices say

One of the show-cause notices states: “TLPL had manufactured and cleared excisable goods SD cards and Tablets without disclosing the same to the department by way of written intimation and without assessing and paying appropriate amount of Central Excise duty on the said goods and thereby they have contravened the provision of the Central Excise Act.”

The notice added: “SD and Tablets are goods which are capable of being bought and sold for consideration as is apparent by the fact that these articles are sold by TLPL to their customers especially students. In the case of SD cards, the input procured by TLPL is blank SD cards, TLPL then records educational content which is existing in their office computers onto the blank SD cards then TLPL ships SD cards to students as per their requirements. Blank SD cards are purchased by customers who can be anyone for the sake of recording content as per their choices whereas the recorded SD cards sold by TLPL are purchased only by students of TLPL because it is of meaning and use only to them. Thus the process carried out by TLPL has transformed an ordinary blank SD card to an educational aid which is of use to students”.

In this process, the taxman thinks the company evaded around Rs 24.53 crore tax over two years.

 According to the investigators, TLPL also procured tablets and loaded application software onto them. TLPL then ships the tablets to students. In selling tablets, the company is said to have evaded around Rs 5.6 crore in tax between 2015 and 2017.

 Two separate cases

The GST department also issued a show cause notice to TLPL on December 31, 2020 in a separate case.

 The company was engaged in commercial training coaching services (CTCS), according to tax authorities. TLPL was offering various modes of ‘CTCS’ and students had the option of receiving coaching through the mode of their choice. On this, the company allegedly did not paytaxes between October 2014 and June 2017. The GST department has alleged a liability of around Rs 18.81 crore payable until March 31, 2021.

 The show-cause notice states: “The total Service Tax evaded on the “Books” portion reading material provided in the course of the coaching service of provision of “CTCS” by way of “Model 1” during the period from October 2014 to June 2017 totally amount RS 18.87 crores”.

 The department recorded a statement by the company’s finance head, PV Rao, in connection with this case on July 25, 2018, according to the people cited above.

 Is GST applicable?

The move itself is indicative of the stringent stance taken by the department against offenders under one pretext or the other, said Sonam Chandwani, Managing Director of KS Legal.

 Speaking to Moneycontrol, an industry source said: “Such companies are seeking the legal view about whether GST is applicable on books/material or not.” He did not want to be named.

 The GST department is now awaiting a response to the show-cause notices issued to TLPL.