Service Tax Dept readies to tighten noose around evaders

Services contribute close to 60 percent to the country's gross domestic product (GDP), however, the amount of service tax collected by the government clearly reveals that tax evasion is rampant in the economy.

A fiscally constrained government has now set about to rectify this. On one hand it has introduced the Voluntary Compliance Scheme and on the other it has empowered the Service Tax Department with the ability to arrest evaders.The department has made about 28 arrests in the past six months, out of which 10 arrests were made this month itself. It has clearly stepped up its fight against tax evaders this new year. And the result is that more than Rs 36 crore are coming in for the government right at the beginning of 2014 itself. 

These are who are under the taxman's scanner: - 

Some recent big ticket arrests include names like Rohit Talwalkar, director of Talwalkar Fitness Solution Private Limited ; Sandeep Doke, director of DIPL as well as a CFO of a Delhi based aviation company, who evaded a Rs 1 crore tax bill. 

The director of IL&FS Tamil Nadu Power Co Ltd too has also received tax summons on possible service tax evasion. 

Sectorally, construction, services, renting immovable land, film copyright, security, services, aviation have all come under the radar.

The evaders could face imprisonment upto seven years if the charges are proven. 

R Sekhar, commissioner- service tax, Mumbai says, “In some cases companies have not declared and many of them have not paid to government despite giving them many opportunities. These are people from different sectors.”

 Of course, there’s the government’s VCS for service tax as well which garnered close to Rs 7700 crore, but given that services contribute 60 percent to the country's economy, this figure is still not enough. And here's where, the provision of arrest granted by the Union Budget in cases of evasion of service tax is helping out. It has definitely given more teeth and confidence to the tax department who say they are exercising caution while making a move, but more big ticket arrests can be expected soon.

 

Sekhar adds, “This provision came only recently. We still need to be very careful. We can’t do anything till we don't have evidence. One can expect five more arrests for Mumbai itself in the next few weeks." 

With the service tax dept cracking the whip, one also needs to watch out if high profile tax evaders like KFA' s Vijay Mallya are brought to book as well.

Source: CNBC-TV18