Summons to shipping firms on service tax payment

The Directorate General of Central Excise Intelligence (DGCEI), as a part of its inquiry into evasion of service tax, has issued summons to all domestic shipping companies, asking them to submit information on services availed abroad and payments made in foreign exchange retrospectively till August 16, 2002.

DGCEI, a wing of department of revenue, Central Board of Excise and Customs, has asked Indian shipping companies to furnish break-ups of foreign exchange remittances from August 2002 to March 2006.

The summons, which has the power to invoke certain sections of the Indian Penal Code, has sought submission of a brief note indicating the reason for such remittances and clarifying whether such service was received abroad or in India.

The department has also enquired if service tax has been paid on these remittances made in foreign currency. The companies have been asked to submit the relevant documents by November 3. This comes at a time when Indian shipping companies are intensely lobbying against 12 taxes levied by the government, including service tax.

Indian National Shipowners' Association (INSA) President and Managing Director of Varun Shipping Company Yudhishthir Khatau confirmed the development.

Earlier, INSA had filed a writ in a high court against the government's decision to impose service tax on services rendered and consumed abroad. Incidentally, the matter is likely to come up for hearing on November 6.

Industry analysts said, "This makes no sense to shipping companies. Service tax with a retrospective effect will wipe off the profits of domestic shipping companies, besides ensuring that they lose competitiveness among global players."

Earlier, speaking at the Maritime Expo organised by the Confederation of Indian Industry (CII), Khatau said: "The 12 taxes currently applicable are not conducive to the growth of Indian shipping. The cumulative effect of these taxes will be an inherent cost disadvantage of 4 to 5 per cent for Indian owners."

He said this would force Indian owners to scout for tax havens like Panama, Malta, Singapore and Cyprus, adding "the tonnage lost to these countries will be lost for ever."

Earlier, the government had exempted nine taxable services availed by the industry abroad (out of the 21 requested by Indian shipowners) from the purview of service tax.