It serves notice on corporation to recover service tax dues

The cash-strapped Vijayawada Municipal Corporation (VMC) received a shock with Customs, Central Excise and Service Tax (CCEST) Department gearing up to attach its bank accounts to recover service tax dues in a day or two, sources said. he CCEST served notices on the VMC for not paying about Rs.1 crore service tax to it for the current financial year. The Corporation officials, however, maintained that the VMC was exempted from the tax. The CCEST officials, however, have decided to attach the bank accounts of the Corporation to recover the dues.

The CCEST Department made a similar move last financial year also. Then, VMC was to pay Rs.9 crore service tax (during 2012-13). The VMC officials moved High Court, which stayed the attachment of accounts, sources said. The CCEST Department, sources say, they made similar attempts in Guntur. They collected Rs.3 crore service tax from Guntur Municipal Corporation (GMC) by attaching its bank accounts. The GMC approached Tribunal, but it did not comment on it as the dues were already recovered.

Judgment

The tribunal recently gave a judgment that the GMC was not insulated from service tax as it was leasing/renting out its properties and using for commercial purposes. The service tax was calculated at 12.36 per cent of the gross value of rent collected by the Corporation.

The CCEST Department officials said the tribunal verdict was applicable to the VMC also. Hence, it was decided to recover the dues from the VMC. The High Court case was related to Rs.9 crore dues estimated during last financial year. So, the High Court stay would not have any impact on efforts to collect Rs.1 crore during current financial year, they said.

In fact, notices were served on all local bodies falling under CCEST Guntur Commissionerate jurisdiction. The list in Krishna District includes Gudivada, Machilipatnam, and Nuzvid. Some, however, like Pedana municipality does not come under tax net as their income through rents/leases do not cross Rs.10 lakh per annum, sources said. EOM

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