Banking and other financial services – private safe deposit vaults – DGST missive – a major goof?
This is normally a bad time of the year, when Revenue is at its sharkish best- and the celebrated DGST is at it again. Remember the national calamity caused by the DGST some years ago clarifying that recipients of goods transport service were not eligible for abatement. Some of the SCNs are still pending. Fortunately the latest from the DGST may not be that damaging as it involves a small group of private locker providers.
The DGST has assumed that from April 2007, there is some major change in the Service Tax structure in relation to Banking and other financial services and wants the details of Service Tax collected from April 2007 from private service providers.
The DGST's letter states,
Your attention is drawn to Section 65(105) ( zm ) of the Finance Act, which states "taxable service is a service provided or to be provided to a customer, by a banking company or a financial institution including a non-banking financial company or any other body corporate or any other person [substituted for commercial concern through budget 2007-08] in relation to banking and other financial service".
The activities of other financial services namely, lending, issue of pay orders, demand draft, cheque, letter of credit and bill of exchange transfer of money including telegraphic transfer, mail transfer and electronic transfer providing bank guarantee, over draft facility, bill accounting facility safe deposit locker, safe vaults operation of bank account are falling under the category of ' Banking and other financial service ' .
In view of above the private service providers of safe deposit vaults are liable to pay Service Tax under the said category of service.
Apparently, the DGST believes that “ commercial concern ” was substituted by “any other person” and this was effective from April 2007! What has happened is the exact opposite. “ any other person ” had been substituted by “ commercial concern ” in the last budget.
So the definition does not read as the DGST thought it does as quoted above. Instead of the words, “any other person”, it now has the words, “commercial concern”!
Who are “private service providers”? Now the DGST introduces a new concept called, “private service providers” Do we have private service providers and public service providers and is there any difference in taxation between the two?
Probably what the DGST believes is that from 1.4.2007, any person (who is perhaps our private service provider) and not a commercial concern alone is liable to pay the tax. So DGST wants to tap that private person!
And incidentally the budget changes in Service Tax law came into force from 1.6.2007 and not April 2007 as the learned DGST assumes!
It would be interesting to see what reports the DGST got from the field!
DGST's F.No . V/ DGST /21(9)/ B&FS /01/2007 Dated : January 3, 2008