25% Service Tax on GTA - DGST’s controversial circular truly withdrawn – confirms Hyderabad Chief Commissioner
The last edition of DDT had carried details of the DGST’s controversial letter and its withdrawal. And how the field refuses to accept the fact that the DG’s letter had indeed been withdrawn! Show Cause Notices are being indiscriminately issued and in some cases prompted by objections raised by the CAG based on the DG’s non existent letter! Imagine the power and range of the DGST. He will not be able to collect a rupee more by his illegal and unwarranted circulars, but he is certainly capable of upsetting normal life for the assessees and making life good for the consultants. It is now more than a year since the DG had withdrawn his letter and surprisingly the issue is still very live. The other day in a seminar at Vizag, this was an agitated issue and all our assurances did not really bring in any cheer as the departmental officers refused to believe that the mighty DG would withdraw his directions. We had supplied copies of the withdrawal letter to several departmental officers so that litigation can be avoided.
In such a situation, the minutes of the RAC meeting in Hyderabad comes as a welcome relief.
And yesterday’s DDT had carried a report of the Rustagi Commission report which suggested,
The DGST Circular created the avoidable confusion. Now, it is understood that C&AG has also taken objection. This matter needs to be resolved—by resorting to retrospective amendment, if need be. The intention can not be to deny the benefit of exemption.
And now the Good News:
CBEC has issued a Section 37 B order to the effect that
1. The notifications exempt taxable services from so much of service tax as specified therein, irrespective of the person made liable to pay service tax.
2. It is, therefore, clarified that any person who is made liable to pay service tax, while discharging service tax liability on such service, is entitled to avail of the benefit of exemption in terms of aforesaid notifications No 32/2004-ST, and No. 1/2006-ST, subject to fulfillment of the conditions prescribed therein by adopting the procedure prescribed vide para-31 of circular No. B1/6/2005-TRU, dated 27.7.2005.
3. The procedure prescribed is that a declaration by the service provider, in all such cases, on the consignment note, to the effect that the conditions of the aforesaid exemption notification have been satisfied, would be sufficient for availing of the benefit under the said notifications.
4. Opinion of Law Ministry has also been sought in this matter. Law Ministry has concurred with the above views of the Department.
5. Therefore, in all such cases, where the above procedure has been followed, no demand notice may be issued on the basis of objection raised by the C&AG office.
6. all pending matters may be decided accordingly. Past instructions, circulars and orders on the issue stand suitably modified.