Muthoot Finance gets service tax notice for Rs 153 cr

Gold loan firm Muthoot Finance today said it has received a service tax notice demanding Rs 153.14 crore in taxes in addition to interest and penalty.
The company has received an order from the Service Tax Department, Muthoot Finance said in a filing to the BSE.
"This demand has been raised under the assumption that there is an element of service tax involved in sale of receivables under bilateral assignment (sensitisation) transaction done between the company and banks and is liable to service tax," the filing said.
The company has received legal opinion and "the order passed by the department is arbitrary and erroneous and therefore, the demand is not sustainable in the law," it said.

Gold loan firm is in the process of pursuing legal remedies available to have the order passed by the service tax department set aside, the filing said.
Meanwhile, Muthoot Finance has entered into an arrangement with Yes Bank for acting as Business Correspondent (BC) for the bank.

Under this arrangement, Muthoot Finance would offer services of the bank to the public through its 4,256 branches spread across the country.
A BC is a representative of the bank who offers services on behalf of the bank to the public.
Earlier banks were not allowed to appoint NBFCs as their BC. However, RBI allowed NBFC to act as BC in June 2014.