Service Tax – CAG Expose
The comptroller and auditor general (CAG) of India has in its performance audit of service tax on construction services for 2008-09 found evasion at Rs710.24 crore.
The CAG has named Lanco Infratech and Larsen & Toubro for not discharging service tax liability worth Rs62.61 crore and Rs272.66 crore, respectively, received between July 2007 and March 2008 for canal irrigation contracts, treating the projects exempted.
Now CAG has recommended setting up mechanisms for monitoring receipt and scrutiny of returns.
According to the Finance Act 1994, service tax is leviable for construction of residential complexes comprising a building having more than 12 units.
“The condition that service tax is payable only when the construction involves more than 12 residential units helps to small housing construction projects, these projects remain outside the tax net.
This loophole is used by construction companies and they build less than 12 residential units thus they get exempted from paying taxes.
CAG has recommended that the single criterion of 12 units is not enough and other criterion such as selling price or plinth area should be specified so that the expensive constructions come under net
Reality Views by sm –
Saturday, March 26, 2011
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