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Mumbai service tax dept tells Bollywood
September, 07th 2013

Imagine Bollywood toughie Sunny Deol shivering at the thought of going to jail. Well, if he doesn't cough up Rs.20 lakh due to the Mumbai Service Tax department soon, he just might end up behind bars.

The department had issued a notice for Rs.1.95 crore service tax which Deol owed them. The star has paid Rs.1.75 crore but the balance is yet to be cleared. The department will be ready with a show-cause notice in the next two days.

Deol is not the only one, three other Bollywood personalities have already faced the department's music. They include, producer Sameer Karnik (who was arrested for service tax evasion of Rs.1.88 crore), producer-director Anurag Kashyap (he was booked for tax evasion of Rs.70 lakh and his bank accounts were attached) and director Tigmanshu Dhulia (was booked for evading Rs.47 lakh tax and his bank accounts attached).

Mumbai service tax commsioner (Zone 2) R. Sekar said, "In the next few days, we might take action against some big names."

He said, "Till now, we have sent almost 132 notices to film and television production houses. The deadline to reply is almost over. But the fact remains that, excluding one or two, no production house has bothered to reply. As a result, we will continue with our action that includes booking those evading service tax and, if required, arresting them."

Notices have been sent to Eros International, Big Cinema/Big Entertainment, Anil Kapoor Films Ltd, Red Eye and Phantom among others.

A large number of copyright service providers, producers and production houses, have not paid their service tax liability. The department had issued letters since 2012 to 132 producers to furnish information relating to copyright services provided and the details of payment of service tax. However, when it did not receive any response, the department issued letters to the producers again last month.

Sekar said, "We have found some production houses who are not paying service tax at all and some of them are collecting service tax but not giving it to department, which is unacceptable."

In this connection, the Film and Television Producers Guild of India Ltd had a meeting with the service tax commissioners on August 29, 2013 and assured complete cooperation. Soon after, Guild informed its members to take this issue and action seriously.

Guild CEO Kulmeet Kakkar wrote to members saying, "There is a feeling in the department that the industry is not taking this matter seriously and not responding to the department. Therefore, we propose to hold a seminar with the tax experts at the earliest for our members and chief financial officers for any clarity they make like to seek on the tax norms." The meeting is still pending.

Several Bollywood producers told this correspondent that they were not running away from service tax and that they would pay up. But they felt that imposing service tax on Bollywood was not correct.

Producer Kumar Taurani said, "See actually our business is creative business, so may be we are not updated. Our chartered accountant is not in place. But because of these 132 notices, everybody will pay, it's not like nobody wants to pay. The law will be followed. We have many things on our head. Film business seems very easy but its very complicated. I think ultimately we will meet department's expectation."

The department is also willing to offer Voluntary Compliance Scheme (VCS) to support the industry in case any defaulting member is not in a position to make such payments immediately. Producer Sameer Karnik is planning to apply for VCS but service tax officials might just reject it.

So choppy days are ahead for film and television production houses. But for Sunny Deol, all he has to do to escape arrest is to pay up the balance due and stop shivering.

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