TDS of Service Tax?
IT is reported that the Government is contemplating TDS of Service Tax. Government feels that this step would boost up revenue and plug evasion. TDS has been very successful in Income Tax and maybe the Government is tempted to replicate this model in Service Tax, but this may not be all that easy in Service Tax as compared to Income Tax. With so many complications and classifications, Service Tax TDS may create more problems than it would solve. Who will decide whether the service is taxable at all and whether an exemption can be availed? There is a suggestion that Service Tax recipient should be made liable in all cases or at least in cases where the liability is more than a certain amount of tax or when the recipients are PSUs.
This is not altogether a new concept.
Nearly four years ago, the CBEC toyed with the idea of TDS of Central Excise. [Please see DDT 777 – 08 01 2008]
Board had suggested:
++ To start with we may focus on big purchases (say Rs. 10 lakhs and above) by big Government purchasers like the Railways, the Defence, P&T Department and DGS&D.
++ We may provide by rule to have clearance of excisable goods from the factory for such supplies without payment of duty against the indent issued by the purchasing department, under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 (analogous to the erstwhile Chapter-X procedure for supply of OE to industrial consumers).
++ The purchasing department will work out the CE duty component from the purchase price and deduct the same at source in a way analogous to the system of deduction of Income Tax at Source.
++ At the quarterly interval, they will forward CE duty so deducted at source to the Department.
++ Cenvat credit availed on the inputs used in the manufacture of such goods may be treated at par with manufactured goods under export, as provided under Rule 5 of Cenvat Credit Rules, 2004.
We really don't know what happened to this grand scheme. Board had asked the Chief Commissioners to give their opinions.
Maybe the file is ‘under active consideration' somewhere.