DGCEI charges Major TV Channels with Service Tax Evasion
IT is learnt that the DGCEI has recently issued notices to major TV Channels alleging evasion to the tune of Rs. 300 Crores.
The Charges:
These companies have procured the TV Channel program distribution rights for distributing the TV Channel programs and sale of advertising time slots on such TV Channels on behalf of their foreign parent companies. The TV Channel programs are broadcasted by the foreign broadcasters and signals in encrypted form are disseminated by them in electro-magnetic waves by up-linking to Satellites. The receipt of TV Channel programs by down-linking of TV Channel signals in India tantamount to import of broadcasting service and the money consideration paid by the Indian Companies to their respective foreign broadcasting parents for import of TV Channel signals is liable for payment of Service Tax by the Indian companies on behalf of their parent companies, under reverse charge mechanism, as per the provisions of Finance Act, 1994, Service Tax Rules, 1994 and Taxation of Services (provided from outside India and received in India) Rules.
They were also found evading Service Tax on several other issues including ‘Intellectual Property Right Service' by undervaluation and wrongfully claiming exemption from service tax on 98 % value of the services and paying service tax on only 2 % value of services. Apart from the above, they were also given show cause notice for evasion of Service Tax under ‘Business Auxiliary Service'.
They were also found engaged in undervaluation of ‘Business Auxiliary Service' provided by it to various broadcasters while distributing their TV Channel services. They were found to be collecting certain amounts from the broadcasters under the head reimbursement of expenses and not including the amount of such reimbursements in its assessable value, thereby evading Service Tax.