Ministry of Finance is abetting Huge Service Tax evasion?
RECENTLY the Delhi High Court wanted to know from the Government why Google is paying Service Tax while Facebook is not. It all started with a writ petition filed by former BJP leader Govindacharya.
In his latest affidavit before the High Court, Govindacharya submitted:
1. That the submissions made through affidavit of Commissioner of service tax, are incorrect and misleading and for such false affidavit, appropriate action may be initiated by this Court;
2. That for the various services provided by the Private Respondent, as per agreements signed in India, government is liable to collect service tax even if service provider claims to have permanent establishment outside the territory of India. Secondly, services rendered by the Private Respondents are composite services which were not exempted but Government is trying to help the Private Respondents in huge tax evasion.
3. That it is incorrect to say that only a company/entity having fixed establishment inside India are liable to pay service tax as per the provisions of the Finance Act because the scheme of Service Tax is different from that of Income Tax.
4. That as per the Service Tax Laws & Rules, Ministry of Finance is liable to collect service tax on all the services which are rendered to be provided in the territory of India. If the service provider's permanent establishment, any office or agent is based in India then there is clear-cut liability to pay such service tax by them. If after an enquiry/investigation, the government fails to establish service provider's establishment in India then service tax is to be recovered from recipients of the said services (as admitted in para 71 of the counter Affidavit. Dt. 21 st May, 2013, filed by Respondent No. 9 i.e. Facebook Inc.) for which necessary details of quantum of services have yet not been obtained by the Service Tax Department as required under Sec. 77 of the Finance Act.
5. That as per counter affidavits filed by various parties in the present proceedings, it looks that service tax is not paid by Facebook India Pvt. Ltd. (R-2), Facebook Inc. (R-9), Facebook Ireland Ltd., Google Inc. (R-10) and Google Ireland Ltd. Instead of obtaining such details and recovery of service tax for current and previous year, the Ministry of Finance is abetting the huge service tax evasion by the Private Respondents and not filing full disclosures before this Court.
6. That the Respondent No. 3 Google India Pvt. Ltd. has admitted payment of service tax till 30th June, 2012 which is also confirmed by the counter affidavit of R-1 but Union of India has failed to give details of payment of service tax by Facebook which is also providing similar services.
7. That Petitioner specifically asked from UOI for details of receipt or classification of payment of service tax by the Private Respondents vide letter dated 28th April, 2014 and reminder dated 9th May, 2014. Five months passed but till now, such crucial documents have neither been submitted nor classification details of previous tax payments has been disclosed in affidavit filed before this Court.
8. That as per the Additional Affidavit dated 20th May, 2013 filed by Respondent No. 2 i.e. Facebook India Pvt. Ltd., they are incorporated to carry on business of Online Support Services, Software Development, Technical Support and Services which attracts service tax liability since they are not in the negative list. Similar services are performed by Google India Pvt. Ltd. as well.
9. That from 1st July, 2012 there cannot be any tax exemption to Facebook and Google for their composite service (advertising agency, data service, selling of web space etc.,) and their service needs to be classified either as Advertising Services or Business Exhibition Services, which are not in negative list of service tax. In view of above, counter affidavit filed by the Commissioner of Service Tax supporting the unlawful exemption and tax evasion by the Private Respondent is wrong, and service tax ought to be also demanded for the period of 2012-2014.
10. That the Union of India has failed to provide details of notice issued under Sections 76 and 77 of the Finance Act to Facebook and Google to provide details of records, books of accounts showing recipients of services in India so as to ascertain their tax liability and also their claims of tax exemption for the period of 2012-2014.
11. That in view of above it is submitted that directions be given to Respondent No. 4 to file a report on tax liability & recovery (either from service provider or recipients of services) on various services provided by the Private Respondents in India through Agreements & Indian operations since year 1996.