Broad confusions/ Board Confucius
Reconditioned cars – liable to tax: In this year’s budget, the scope of authorized service station was expanded to include reconditioning or restoration of old vehicles and now Board has totally misunderstood its own law. The Board letter says, “A number of motor vehicle manufacturers provide a scheme by which the old vehicles are sold to the customers after reconditioning or restoration. For this purpose, old vehicles are reconditioned or restored by such authorized service stations or centres.” Now Board says this is liable for Service Tax. The service centre buys an old car from somebody, reconditions it and sells it to somebody else. If I buy such a reconditioned car, what is the service I am getting from the agency? I am simply buying a car! The Board says this attracts Service Tax! Pray, how the value of service is going to be calculated?
Manpower recruitment – value includes salaries: Board clarifies that the salaries paid direct to the hired workers is also includible in the value of taxable services. For how long? If I have an agreement with the agency to supply me workers and I pay him for hiring me the workers and I pay the workers, how can the payment made the workers be taxable? What happens if the worker runs away after I paid the tax ( in advance)?
Indian Service Tax abroad? The Board letter clarifies that if the service provider does not belong to India and the service recipient belongs to India, the recipient of taxable services himself is treated as the provider of the taxable services and the services are taxed in the hands of the recipient – even if the service is rendered abroad. If you get your clothes laundered abroad during a visit, don’t tell your Service Tax officer about it; he will demand tax from you. Money Laundering is a better option. The Board very graciously informs that service received by an individual abroad is exempted. Is it taxable in the first place for Board to exempt? Does the jurisdiction of the Government of India go beyond the Indian shores? How about posting some Service Tax officers abroad to find out if any Indian is receiving services there?