The Formula One race organizers in India, Jaypee Sports International Ltd (JPSI), seem to have landed in trouble with a central revenue intelligence agency -- under the finance ministry -- booking a case against the organizers for evading payment of duties to the tune of Rs 20 crore.
The Directorate General of Central Excise Intelligence (DGCEI) has booked a case of duty evasion against the organizers of F1 race held in Greater Noida last month. The organizers had paid Rs 200 crore to the F1 brand owners but DGCEI alleged they did not pay the 10 per cent service tax on the remittance.
Though, normally, the company receiving payment in lieu of services rendered deposits the levy, in this case since the company was not based in India, the obligation was on the organizers to deduct the tax and make payments, a senior finance ministry official said.
"I'm not aware of any such thing. We have spent thousands of crores on putting up a good show so why should we not pay Rs 20 crore. We're law abiding citizens and we're sure that the law will take its course in a democracy," was JPSI MD Sameer Gaur's response.
DGCEI officials have also picked up account books and other documents from the organizers to ascertain all receipts and payments made during the Formula One event to calculate the company's total tax liability.
The government is likely to make at least Rs 20 crore every year from the payment the organizers will make to the F-1 brand holding company for using the brand. The other tax earnings would be from income tax, service tax on tickets sold, advertisement revenue, etc.
The government also earns by way of customs duty on import of beverages, special petrol and vehicles. Barring vehicles, all other items are subject to customs duty as they are consumed in India and not re-exported. On the items that are re-exported the government refunds duties up to 98% on the amount of tax paid.