As the tussle between the service tax department and Securities & Exchange Board of India (Sebi) over payment of Rs 500 crore in service tax gets muddled, thestock market watchdog has stuck to its guns and written to tax sleuths that they are not liable to pay any such tax amount.
The market regulator wrote to the department soon after the taxman got the formal nod from the Central Board of Excise & Customs (CBEC) to go ahead with its ongoing investigation against Sebi for not paying tax on the services it has provided since 2012.
"Sebi has given their view, as to why they are not liable to pay service tax," a top service tax official told dna. However, this will not affect the investigation and the further course of action in the case, he said. "We had clarified that services provided by Sebi were taxable. They had their own view on the matter. But our stand is still same. We will continue with the ongoing probe, and a show-cause notice will be served soon,"
According to sources, the regulator is likely to move court after the departments serves the show-cause notice.
An email sent to the Sebi went unresponded.
The sources said that Sebi has a conflict of interest over Section 25 of the Finance Act. In its reply to the department, it had mentioned the provisions of the respective norms. It said, as a regulator from the date of its constitution to the date of establishment will not be liable to pay wealth tax, income tax or any other tax in respect of their wealth, income, profits or gains derived.
dna was the first to report it on August 14 that that finance ministry has backed the tax department to continue its investigation and initiate further course of action. This followed Sebi's move seeking clarification from the ministry over the conflict of interest on the department's tax assessment.
According to the officials, the CBEC board has clarified that the services provided by Sebi were not specifically exempted from taxation or kept in the negative list, and that they were liable to be taxed.
The tax liability on Sebi stood at Rs 250 crore between 2012 and 2015. The regulator needs to pay interest and penalty along with it," said the official.
The rate of interest on late payment of service tax depends on the extent of delay in the payment. Delay up to six months will attract 18% interest while it will be 30% for more than a year.
On the CBEC formal order, a Sebi spokesperson had earlier said, "The matter has been legally examined by Sebi and the legal opinion is that service tax is not applicable to the regulator." He said the regulator has represented to service tax authorities accordingly.
According to the department, Sebi provides services to stock exchanges, its members, brokers, investors for processing of IPOs, debt issues, mutual fund, new fund offers and other services, including informal guidance to companies.
This includes fees of registration of intermediaries, sundry regulatory fees and fees from offer documents filed by companies and on foreign funds.
In 2014, Sebi's fee income stood at Rs 175 crore, which is 18% more than it earned in the previous fiscal.
The government had switched to negative list regime for service tax in 2012, under which all services which are not under negative list are taxable.
Source - DNA
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