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Service tax dept may spoil your grand party
August, 14th 2014

The next time you organise a grand function, be ready to face the taxman. The Central Board of Excise & Customs (CBEC) has directed its officers to check for tax evasion by keeping an eye on events which receive wide media coverage, such as an ostentatious wedding or other such functions.

Usually, the service provider pays the tax and recovers the amount from the recipient. So, if somebody hires an event manager for a function, the service receiver should pay tax to the service provider, along with the payment of his fee. Even services such as setting up pandals and shamianas are taxable.

“The tax department is perfectly capable of disrupting the wedding. They will keep a tab on the event manager and approach him at the most opportune moment to make him pay the past dues,” said a tax expert with a leading consultancy firm, asking not to be named.

Grand weddings or any other functions coming to the taxman’s notice through media coverage or otherwise
Sectors prone to evasion such as construction, realty and works contract, renting of immovable property
Business support services, manpower supply and security services, goods transport operators
Govt bodies such as the railways, postal department, police, municipalities and cantonment boards
Mutual funds and insurance companies, goods transport agencies and foreign service providers
Importing services or those having a higher payment through Cenvat credit instead of cash payment
Top 100 service tax assessees and top 10 services in their areas to be the focus of every commissioner

Taking a cue from declarations made in the amnesty scheme for service tax last year, it also identified construction, real estate and work contracts, renting of immovable property, business support services, personnel supply and security services, and goods transport operators as sectors prone to evasion.

“The basic exercise which should be done in such cases is to see whether the person is a service tax assessee, whether he has been pay-ing duty and filing returns regularly, Cenvat utilis-ation profile and details of pending cases,” says the CBEC Action Plan for 2014-15.

Assessing officers were also asked to closely monitor service tax payments by government bodies such as the railways, postal department, police, municipalities and cantonment boards. Instructions were given that the goal was to ensure payment, not merely issuance of show-cause notices for non-payment.

“Government bodies provide various services which are taxable, such as security by the police. The tax department wants to make sure tax dues are collected from the people receiving these services and deposited by service providers,” said Prashant Deshpande, senior director, Deloitte.

Assessees taxed under a reverse charge mecha-nism, importing services or having a higher payment through Cenvat credit instead of cash payment will be on the radar, too.

In the reverse charge mechanism, a receiver of service is respo-nsible for the payment of service tax. The category comprises mutual fund and insurance companies, goods transport agencies and foreign service providers.

“Deterrent action such as arrest and prosecution will be resorted to where applicable. The publicity arising out of such action enhances the deterrent effect of the provisions,” CBEC said. Also, that officers should do provisional attachment of a tax defaulter’s property wherever possible, and insist on recovery of dues while opposing bail applications in case of arrests.

In the anti-evasion efforts, high-value cases will be given priority. The officers were asked to concentrate on the top 100 service tax assessees and top 10 services in their areas.

The strategy for augmenting tax revenue was unveiled at the two-day annual conference of CBEC’s chief commissioners and directors general, which concluded on Tuesday. Some of the measures were also discussed with Finance Minister Arun Jaitley, who inaugurated the event on Monday.

The indirect tax colle-ction target for this year is Rs 6.24 lakh crore, about 26 per cent higher than the Rs 4.96 crore collected in 2013-14. This will be led by service tax collections, projected to rise 40 per cent to Rs 2.15 lakh crore, against Rs 1.54 lakh crore last year. Growth in Customs and excise duty collections is pegged at 17 per cent and 22 per cent, respectively, in 2014-15.

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