Service tax dept may disrupt your grand party

To get what it thinks are its dues, its brass have directed; construction, realty, renting of property, personnel supply, security & goods transport among those under lens
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 like an ostentatious wedding or such other function.

Usually, the service provider pays the service tax and recovers the amount from the service 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 like 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.

Taking a cue from declarations made in the amnesty scheme for service tax last year, it also identified construction, real estate and works 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 paying duty and filing returns regularly, Cenvat utilisation 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 like the railways, postal department, police, municipalities and cantonment boards. Instructions were given that the goal was to ensure payment and 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 that tax dues are collected from the people receiving these services and deposited by the service providers," said Prashant Deshpande, senior director, Deloitte.

Assessees taxed under a reverse charge mechanism, 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 the service is responsible for the payment of service tax. The category comprises mutual fund and insurance companies, goods transport agencies and foreign service providers.

"Deterrent action like 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 application in case of arrest.

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

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 collection 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. The will be led by service tax collections, projected to rise by 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.

Service Tax Scanner

• Grand wedding or any other function coming to taxman’s notice through media coverage or otherwise
• Sectors prone to evasion like construction, realty and works contract, renting of immovable property
• Business support services, manpower supply and security services, goods transport operators
• Govt bodies like the railways, postal department, police, municipalities and cantonment boards
• Mutual fund 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 assesses and top 10 services in his area to be the focus of every commissioner