Foreign service recipients account for bulk of tax evasion: CAG

Domestic firms receiving services from overseas entities accounted for a quarter of the service tax evasion during 2008-09, according to the CAG report.
    
Of the Rs 375.6 crore that apex auditor CAG found as revenue loss in service taxes in its findings of FY'09, Rs 92.6 crore was due to tax not paid by Indian recipients of foreign services.
    
As per the tax rules, the receiver of services in India is liable to pay service tax for services received by him from a non-resident who does not have an office in India.
    
Though Comptroller and Auditor General's findings have helped in some recovery, yet large chunk remains uncollected. About 15 per cent of the short levy has been recovered.
    
Most of the loss is related to purchase of intellectual property rights, followed by services of banking, business auxiliary, management consultants and consulting engineers.
    
Hero Honda Motors, Escorts, Napino Auto Electronics and Munjal Showa obtained services from foreign service providers and paid Rs 414.6 crore as royalty, technical know-how fee and others during the period between April 2004 and March 2008.
    
"However, service tax of Rs 47.80 crore leviable under intellectual property right was not deposited, which was recoverable with interest and penalty," CAG said.
    
Ranbaxy Laboratories obtained technical know-how from foreign service providers and paid professional charges of Rs 137 crore during 2007-08, the auditor's report said.
    
"However, service tax of Rs 16.94 crore under management consultant service was not paid," it said.
    
Bharti Airtel appointed different overseas companies for providing international roaming services on its behalf in different countries and paid Rs 15.40 crore for receiving such services during April 2006 to March 2008.
    
"...But service tax (of Rs 1.89 crore) under the category of business auxiliary service was not paid," the auditor said.
    
Bharat Petroleum Corp obtained consulting engineers' services from various foreign service providers and paid Rs 8.72 crore as technical fee and royalty during 2003-04 to 2004-05, but service tax of Rs 88.5 lakh was not paid.
    
Air India Ltd (now NACIL) engaged services of ABN Amro, Singapore and foreign branches of ICICI Bank and SBI Bank for arranging loans and paid fee of Rs 28.5 crore during December 2006 to January 2008.
    
"However, applicable service tax of Rs 3.49 crore was neither paid by service providers nor was it paid by the recipient of services," CAG said.