Ministry mulls separate arm to check service tax dodging

Concerned over the high incidence of service tax evasion, the union government is reportedly mulling over the creation of a separate intelligence unit to check the menace and stop leakage of revenue.

The proposed 'directorate of anti-evasion' to check service tax evasion is likely to be set up by the finance ministry close on the lines of two other revenue intelligence agencies under it - the Directorate General of Revenue Intelligence (DRI) and the Directorate General of Central Excise Intelligence (DGCEI), according to PTI citing official said.

The Central Board of Excise and Customs (CBEC) has detected service tax evasion of Rs9,800 crore during April-December period of the last fiscal (2012-13) against Rs5,000-6,000 crore in the same period of 2011-12.

The move to form a new directorate came after rise in the number of services under the service tax ambit.

"The number of services under service tax has increased significantly. There is a need to strengthen anti-evasion activities in service tax to ensure proper compliance from service tax assessees. A separate directorate of anti-evasion on the lines of DRI and DGCEI for service tax may serve the purpose," according to an official note by the ministry.

At present, DGCEI is entrusted with the responsibilities for collecting intelligence and acting against both the central excise and service tax evaders, whereas the DRI is mandated to check customs duty evasion and collection of intelligence about smuggling of contraband goods, narcotics and under-invoicing, among other things.

The sources said the DGCEI and DRI have been actively catching service tax, excise and customs duty evaders. However, a separate directorate may help in ensuring strict check on service tax evasion.

There are more than 100 taxable services including air travel, eating out at restaurants, staying in hotels, clubs or guest houses, renting of immovable property, hiring a cab, health and fitness clubs and outdoor catering among others mandated to pay service tax at the rate of 12 per cent.