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Service tax collections from the fashion design industry are yet to take off because of the loopholes in the definition of the taxable entity.
Only five out of the 85 fashion designers listed with the Fashion Design Council of India, the apex body of fashion designers, have registered to pay the tax so far.
The reluctance of designers to register stems from the clause in the statute books where fashion designers who offer services such as designing, preparation of pattern incorporating the requirement of the client are covered, but tailors are not covered since they are only involved in stitching and not designing.
Says Vinod Kaul, executive director of the FDCI: "The service tax clause is not a significant move as far as the fashion designers are concerned. This is because designers are largely vendors and not just service providers."
On the other hand, a senior government official says, since the clause came in to force as late as August, registrations are gaining momentum now.
Even though most designers said they have no hassles about their sector being taxed, they also conceded that most of their constituents have yet to come under the service tax net.
"The government has presumed that designers should be paying the taxes whether or not they fall under the clause," said Anju Modi who has approached her lawyer on the issue and plans to register soon.
JJ Vallaya who has also applied for registration is not too happy with this introduction.
That clarifies the fact that designers like Ashish Soni, Aki Narula, Ravi Bajaj, Manish Malhotra, Rohit Bal et al who have been engaged as design consultants by various corporates will have to comply with the norm and eventually give in whether they like it or not.
The FDCI on its part is persuading designers to get themselves registered. "The fear of officials harassing them and looking in to their bill books is what is keeping the designers from getting registered," said Kaul.