The Central Board of Excise & Customs has supported the fact that the $4 should pay service tax to the government.
Service tax officials will scrutinize $4s books to estimate its total tax liability. Largely based on back-of-the-envelope calculations, the summation would reach up to be Rs 500 crore. Justifying the move, govt’s apex indirect taxes body felt $4 because services provided by the stock market regulator were not specifically exempted from taxation or kept in the negative list.
SEBI charges a fee for providing a range of recurring and non-recurring services that include certain transactions and for processing of public offers for equity, corporate debt and mutual funds. In fiscal year 2014, it had a fee income of Rs 175 crore, up nearly 18% from Rs 148.7 crore it earned in the previous $4. Recurring fees includes those levied for registration of intermediaries, sundry regulatory fees and fees from mutual funds while non-recurring ones include those levied on offer documents filed by companies and on foreign funds. "The matter has been legally examined by Sebi and the legal opinion is that service tax is not applicable to Sebi. Sebi has also represented to service tax authorities accordingly,” a spokesperson for Sebi told The Economic Times.
The government had switched to negative list regime for service tax in July 2012, which meant that all services barring those specifically exempted or included in the list were liable for taxation. Service tax is levied at 14%.
In its Budget for 2015-16, the government had pruned the negative list to exclude services such as the auction of spectrum and mining rights and leasing of government land and buildings. However, this change in law is yet to be notified. While $4 has been exempted from paying minimum alternate tax, it is quite odd to see a regulator being asked to cough up service tax.
And now SEBI being made to pay tax puts the spotlight on tax department after the controversy over minimum alternate tax.
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