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Does new service tax law attract tax on illegal services?

CA Santosh Kumar Eligeti (Partner) (151 Points)

15 August 2016

I just wanted to know

Does new service tax law cover illegal activities? What if the service tax officials asks to pay the taxes as the services are not in the negative list and in mega excemption list?

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8 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177852 Points)
Replied 15 August 2016

"What if the service tax officials asks to pay the taxes as the services............"

Without knowing exect type of service rendered to society/nation; whow can we decide about its taxation/genuinness?

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CA Santosh Kumar Eligeti (Partner) (151 Points)
Replied 15 August 2016

For example... the services rendered by the private bus operators in daily route basis which is illegal as they does not hold stage carrier permits. They also penalised by the Road Transport Authorities. It is well known black collar business.

Does it attract service tax even though it is an illegal service activity?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177852 Points)
Replied 15 August 2016

" .........illegal as they does not hold stage carrier permits."

As the departments are totally different, for both of them the activity is different. As per RTO, the activity is without permission, so can be penallized under their act.

But for Service Tax department, its an taxable service. So, they can very well ask for sevice tax registration .....and if not possible, then penalty.

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CA Santosh Kumar Eligeti (Partner) (151 Points)
Replied 15 August 2016

Sir.. I agree... But I never read any definitions on illegal activities in Service tax act.

What if some government officials takes bribe to do some works. Will it be charged as comission and will service tax levied?

CA Santosh Kumar Eligeti (Partner) (151 Points)
Replied 15 August 2016

Sir.. I agree... But I never read any definitions on illegal activities in Service tax act. What if some government officials takes bribe to do some works. Will it be charged as comission and will service tax levied?

Can't we take the definition of illegal activities from the other acts when the act don't have any?

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 15 August 2016

As per my understanding, both Finance act and Road transport act are separate statutes having different intent. Definition of one statute having a different object, purpose and scheme could not be applied mechanically to another statute. The object of Finance act, 1994 which empowers levy of service tax is to raise revenue while road transport enactments is to ensure proper compliance with transportation rules and ensuring public safety. Thus, clarification of an activity as "illegal" under a different statute cannot make it as illegal for levy of service tax. If a service rendered by an assessee is not exempted under mega exemption notification or is not covered under negative list of services then such service must be taxable for sure. That's my view.
Thanks...

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177852 Points)
Replied 15 August 2016

My Dear Santosh, we as well educated person should try to avoid any such situation, but should never support it.

Your first activity is Un-authorise, but now you are going for illegal one.

If someone does wrong, do not give us license to do any such activity. On bribes, let me say, we are on much better position. And we can still take Any-corruption bureo help, but if our activity is AUTHORIZED.

Please don't expect any more comment from my side. May God Bless You.

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