DGST eyes tax on 1.19 lakh cr worth of foreign remittances
Following a three-month investigation, the Directorate General of Service Tax (DGST) is set to approach 6,500 bank branches across the country this month to impose service tax on foreign remittances worth Rs 1,19,000 crore towards import of services.
The move aims to plug "possible leakages" in tax collection over the last five years in transactions made by individuals for services availed from abroad. Sources said the DGST approached the Reserve Bank of India in July, around the time the government included all services under the tax bracket from the earlier 120.
The RBI is believed to have given the DGST access to information about foreign remittances for 37 purposes such as communication, construction, insurance, financial, postal, courier, satellite services etc. A comprehensive list has now been shared with the DGST for every transaction in these categories. Every time a foreign remittance is made through a financial channel, banks seek details of the currency, country and purpose and forward it to the RBI.
Based on the information it has, the RBI has estimated an average 20 lakh transactions per month in the last five years by 6,500 bank branches. Sources said that officers from 23 DGST zones will now ask the banks for details of each transaction. Although purpose codes are used for accounting reference by the RBI and the banks, and the data categorises transactions, it does not give full details of a transaction, one official said. The DGST will now examine each transaction to decide if service tax needs to be collected.
"While there are many purposes, these 37 have been identified by the RBI and the DGST as services which come under service tax," said another official. Experts believe that the limitation period offered under the Act is 18 months with five years usually taken into account for non payment or wilful evasion.
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