Taxman casts eye on chambers

Industry bodies asked to tell which services can be taxed.

In a move that has stumped the four industry chambers "" CII, Ficci, Assocham and PHDCCI "" the service tax department has sought details of services offered and the amount of subscription charged by them, to ascertain their liability to pay service tax.

A letter from the department, issued recently, has also sought from the bodies a copy of the balance sheet for the 2005-06 period, the structure of the organisations, and the article of association.

While the chambers were preparing to respond formally, sources in the know said most of them would contest any liability since they were charitable organisations.

Services provided by a club or an association to its members have been brought under the service tax net from June 2005.

The tax department, in its communication, pointed out that a "club or association" did not include any person or body of persons engaged in activities which were in the nature of a public service, and were of a charitable, religious or political nature.

"Your organisation is a premier body of persons providing services for a subscription to your members, and does not fall under any of the categories excluded in the above definition. Accordingly, you are liable to pay service tax on the subscription amount collected from the members of your association," it said.

Chambers like Ficci have in the past got recognition from the tax department as a charitable institution. The I-T department, in an order passed for the assessment year 2002-03 in the case of Ficci, had said it was eligible for exemption since its activities were aimed at promotion, protection, and development of trade, commerce and industry in India.

A functionary of the chamber said FICCI was entitled to exemption from service tax on the same grounds on which it had been exempted from paying income tax.