TDS for Service Tax

The Finance Ministry is toying with the idea of extending the concept of Tax Deducted at Source (TDS) to service tax.

The Central Board of Excise and Customs (CBEC) has formed an expert group to look into the feasibility of the proposal, which will entail the user of a service to deduct service tax before making payments to the service provider.

“TDS is currently used for income tax. There is now an idea that has been floated as to why not have TDS for service tax as well. This does not mean it will be implemented immediately. Let the Expert Group come out with its recommendations,” Mr S. Dutt Majumder, Chairman, CBEC said.

If the CBEC decides to extend TDS to service tax, then it would seek the views of other stakeholders, including the public, and place the report on its Web site, Mr Majumder said.

“Whether we are convinced with having TDS or not….that also is not decided. Only a group has been formed since this idea has been floated,” he said.

The Finance Ministry has written to apex industry associations seeking their views on the idea of extending TDS to service tax. They have also been asked to give their views on the modalities for collection of TDS on service tax.

The current move to set up an expert group comes amid concerns over disproportionately small share of service tax collections to the overall indirect tax kitty. This is despite the services sector accounting for 65 per cent of the country's GDP.

In 2010-11, service tax collections accounted only for 20 per cent of the Centre's total indirect tax kitty.

Another area of concern for the Revenue Department is on the issue of filing of service tax returns. Although there are 15 lakh service tax registrants, only 6 lakh returns are being filed.

www.thehindubusinessline.com

KERALA TO CRACKDOWN ON MICROFINANCE INSTITUTIONS

KERALA TO CRACKDOWN ON MICROFINANCE INSTITUTIONS

The Kerala government plans a crackdown on private microfinance institutions in the state in view of complaints that some of them are exploiting the public by charging high rates of interest, Chief Minister Oommen Chandy said here today. A total of 43 cases had been registered against such institutions in different parts of the state, Chandy said in reply to a submission on the subject by V S Sunilkumar (CPI) in the assembly. Strict legal action would be taken against institutions and individuals who exploit the people and also charge exhorbitant interest after lending loans, he said. - www.financialexpress.com

Tax Havens Sharing Information - Economic Times

MUMBAI: A fortnight ago, three businessmen from the same family were summoned by tax officials in Mumbai and Kolkata to appear with their tax returns and passports. In a world where tax sleuths carry out fishing enquiries to trace undisclosed income of wealthy individuals, jewellers and builders, the summons may have looked innocuous. But they weren't. For book keepers, tax practitioners and the well-heeled with offshore, secret bank accounts, it surfaced a lurking fear: some tax havens are slowly, but surely, beginning to share specific information with Indian authorities. 

Around March-April, the three businessmen had moved money from their bank accounts in Isle of Man , Cayman Islands and Guernsey. In one case, money was wire transferred from Guernsey to Switzerland while in two other cases, funds were moved from personal accounts to accounts of trusts where the individuals concerned were beneficiaries. "We understand tax authorities have come to know of these transactions. This is possible only if these jurisdictions have shared information," said a person aware of the transactions. "This was unthinkable in the past when money changed hands and moved from one account to another without anyone getting a whiff of it," he said. Perhaps, not anymore. 

Shefali Goradia, partner at tax consultant firm BMR Advisors , said, "But, under the exchange of information treaties, the countries are required to share information only if the other country has reasonable ground to believe there has been a tax offence. They are not required to respond to general inquiries." 

In this case, the tax department indeed had something definite to back the summons. The three businessmen also figure in the list of Indians (some of whom are NRIs) holding accounts in a Liechestien bank. Two years ago, Germany had shared the list with the Indian government. "The I-T Department has long completed the assessment and raised demand from most in the Liechestien list, and some cases have reached the appellate stage. So, it cannot be in connection with the Liechestien probe. We strongly feel that the department sought information from some of the other tax havens that are co-operating," said a senior Mumbai-based chartered accountant. When contacted, officials in the Income-Tax Department declined to comment as the matter was under investigation. 

Passport numbers, which banks worldwide use for the 'know your customer' procedures, can be useful in snooping around for bank account or transaction details of residents, said the city-based accountant. "We have this perception that tax havens may try to stonewall information. But this may not be true in all cases," he said. In fact, Indian tax officials can approach tax havens with basic details like name, address, passport number and some evidence of tax violation (even a trivial one) to obtain information. 

According to Anup Shah, partner at Pravin Shah & Associates, tax officials may go through passports to verify whether the person concerned, who may have claimed NRI status and obtained tax benefit, has spent the stipulated time abroad. "Information is bound to flow once tax treaties are in place," said Sudhir Kapadia, tax market leader, Ernst & Young. "But what many aren't aware of is that we have already signed a treaty with Singapore, in line with the modified treaty with Switzerland, following which we can ask Singapore for specific bank account details which was not possible before," he said. 


Source: The Economic Times