[aaykarbhavan] Business standard news updates 9-10-2013

Construction firms top service tax amnesty charts


VRISHTI BENIWAL

New Delhi, 8 October

If the applications for availing of the government's service tax
amnesty scheme are any indication, companies involved in construction
and works contracts might well be among the biggest evaders of service
tax. According to preliminary information with the finance ministry,
these two sectors account for the bulk of the application;
transportation and supply of manpower follow.

The Service Tax Voluntary Compliance Encouragement Scheme (VCES),
announced in Budget 2013- 14, had drawn 3,681 applications declaring
tax to the tune ₹ 897 crore as on September 30. Of this, tax of ₹ 58
crore had already been paid, while the rest was to be paid by December
31, when the scheme would close. The scheme is likely to bring to the
exchequer about ₹ 1,500 crore this year — 50 per cent more than the
initial internal estimate of ₹ 1,000 crore.

A finance ministry official said some of these applications that
didn't meet the eligibility criteria might be rejected. But the
exchequer might still get about ₹ 1,500 crore. The worry, however, is
that many taxpayers have stopped making regular payments and are
applying under the scheme to avoid interest, penalty and prosecution
on evasions since 2007.

Moreover, under VCES, service tax defaulters can pay half their dues
by December 2013 and the rest by June 2014. Generally, the service tax
collected has to be paid to the government in a month. Payment
defaults in tax collections exceeding ₹ 50 lakh become non- bailable
offence only after six months from the due date.

The underreporting of services would be even higher. Services tax is
levied at 12 per cent and at that rate the undisclosed amount would be
₹ 7,475 crore. However, as abatement is allowed on many services, the
value of total business that goes unreported would be higher.

In case of flats, abatement is 70 per cent and the rate varies in
other categories of construction, works contract, etc. Now, assuming
an abatement rate of 70 per cent, this would mean services worth ₹
24,917 crore were not reported.

"The trend emerging as of now is that a lot of taxpayers from the
construction and works contracts are applying for the scheme," said
another finance ministry official.

An addition of ₹ 1,500 crore would be a major boost to service tax
collections this year, pegged at ₹ 1,80,141 crore; and, declaration of
service tax dues could add only a bit to the country's GDP. The
underreporting of business worth ₹ 24,917 crore would account for only
0.24 per cent of India's GDP in 2012- 13. However, the exercise would
bring new taxpayers to the government and add to GDP in subsequent
years. At present, the services sector contributes about 65 per cent
to GDP, while service tax constitutes less than a third of total
indirect tax collections.

At present, of the 1.7 million registered assesses under service tax,
only 700,00 are filing returns; some are exempted and some have
turnovers of less than ₹ 10 lakh.

Turn to page 9 >

3,681:

Applications received*

₹ 897 crore:

Tax declared*

₹ 58 crore:

Tax already paid*

₹ 1,500 crore:

Total tax expected

Deadline:

December 31, 2013

Key applicants:

Construction, works contracts

Dues to be paid:

50% by December and the rest by June 2014

Benefits:

No interest, penalty and prosecution

Period covered:

Since October 2007

1.7 million:

Registered service taxpayers at present

700,000:

Return filers

65%:

Service sector's contribution to GDP

33%:

Service tax contribution to indirect taxes

₹ 1,32,697 crore:

Service tax revenue in 2012- 13

₹ 1,80,141 crore:

Target for 2013- 14

*As on September 30

As of September, account for bulk of applications for availing of the
govt's amnesty scheme




NSEL fraud: I- T turns the heat on brokers


JOYDEEP GHOSH & RAJESH BHAYANI

Mumbai, 8 October

Brokers, who had been crying from the rooftops about the ₹ 5,700-
crore " scam" at National Spot Exchange Ltd (NSEL), are now facing
some uncomfortable queries from the income- tax department.

The I- T department, which has been roped in to investigate the case,
feels many of the people named as investors exist only on papers.

A senior I- T official said the department had asked stock brokers to
provide data on NSEL investors to check whether the know- your-
customer ( KYC) norms had been adhered to. According to him, the
department believes the actual number of investors involved in the
scam is much less than the 13,000 mentioned by NSEL.

The I- T department's suspicions arose from the claims made by the
NSEL management that many brokers had invested from their proprietary
books. This implies brokers were actually investing their own money in
these trades. The department wants to know if the proprietary money
was invested through 'benami' or even dummy investors to earn high
rates of return, of 14- 16 per cent.

"Some brokers may have picked up cash from the market and invested in
these trades through dummy accounts. We need to know whether the
investors paid tax on the invested money or were trying to indulge in
money laundering through this channel," said the I- T officer.

Priti Gupta, executive director (commodities & currency), Anand Rathi
Commodities, confirmed the I- T department had been following this
line of investigation: "We have given details of all our NSEL
investors to I- T department officials. We have also told them the KYC
norms have been adhered to and the money has been invested through
proper bank accounts." Another leading broker with huge exposure to
NSEL also said it had submitted PAN details of its investors to the
department.

The I- T department has also written to all the investors to find out
if they exist and if they have paid tax on the money invested in NSEL.
This move could prove to be a double whammy for those who have not
paid tax on the amount invested, as they will have to cough up extra
money to pay tax with interest and, may be, penalty.

Since August, the I- T department has been raiding various parties
involved in the NSEL scam. In the first round of raids, 24 borrowers
were raided. After that, for the past two weeks, the department has
been raiding and going through the books of the stock brokers.

On October 1, the Economic Offences Wing raided the office and
residence of NSEL ViceChairman Jignesh Shah. Besides, the premises of
some of the other top executives, including MCX- SX CEO & MD Joseph
Massey and former NSEL MD Anjani Sinha were also raided.

THE SMART INVESTOR 15 >

>YOUR MONEY: Double whammy for NSEL investors

Department seeks investor database on the suspicion of fictitious investors

Peons, guards were directors at defaulting companies

At least two of the 27 firms that defaulted in making payments to NSEL
were found to have appointed peons and security guards as "dummy"
directors, said an official involved in the probe into the fraud at
the beleaguered exchange. This was revealed when the directors of
defaulting firms began turning up at the Economic Offences Wing of the
Mumbai Police for questioning in the scam. PTI IN THE EYE OF A STORM

Brokerages with biggest exposure to the NSEL crisis

(Receivables as on August 20, in ₹ cr)

Motilal Oswal Commodities Brokers 263.0 Systematix Commodities
Services 277.7 Geojit Comtrade 313.2 India Infoline Commodities 326.2
Anand Rathi Commodities 640.8 Indian Bullion Market Association
1,170.1





--

CS A Rengarajan
9381011200

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