Show-cause to Airtel, Vodafone on Cenvat violations
Bharti Airtel and Vodafone have been issued show-cause notices by the service tax department for alleged non-payment of service tax. These companies have drawn the ire of the department for wrongful availment of Cenvat credit.
NEW DELHI: Bharti Airtel and Vodafone have been issued show-cause notices by the service tax department for alleged non-payment of service tax. These companies have drawn the ire of the department for wrongful availment of Cenvat credit.
The action comes in the backdrop of a massive dip of over 40% in tax collections in 2007-08 from the sector, even as it registered a growth of over 24%. The final disaggregated numbers are yet to be released. Interestingly, service tax revenues from telecom sector declined even as overall collections grew 35%.
The Central Board of Excise and Customs had instructed field formations, especially, audit and investigation wings to look into the reasons for this dip in service tax collections by 45% to Rs 1,190.61 crore in H1 of 2007-08. While Bharti Airtel has been issued a show-cause notice for an amount of Rs 46.26 crore, Vodafone has got it for Rs 4.93 crore. Other service providers are also likely to be issued notices, sources told ET.
Bharti has been issued the show cause for wrongful availment of Cenvat credit on non-specified goods like towers, shelters, etc, availment of Cenvat credit twice on the strength of same invoice and availment of credit without any supporting documents.
When contacted a Bharti Airtel executive said:��� This is an interpretation issue. When you put up a tower, or any other passive infrastructure, the industry is of the view that this is capital goods and therefore the telecom sector has been claiming the Cenvat credit for this.
The government, however, does not subscribe to the viewpoint that these are capital goods. All players in the industry have got similar notices and we will send our responses to the government. This is therefore an industry issue on the interpretation of the law by both sides. Whatever be the final outcome between the industry and the government on this issue, we will abide by it.���
The action comes in the backdrop of a massive dip of over 40% in tax collections in 2007-08 from the sector, even as it registered a growth of over 24%. The final disaggregated numbers are yet to be released. Interestingly, service tax revenues from telecom sector declined even as overall collections grew 35%.
The Central Board of Excise and Customs had instructed field formations, especially, audit and investigation wings to look into the reasons for this dip in service tax collections by 45% to Rs 1,190.61 crore in H1 of 2007-08. While Bharti Airtel has been issued a show-cause notice for an amount of Rs 46.26 crore, Vodafone has got it for Rs 4.93 crore. Other service providers are also likely to be issued notices, sources told ET.
Bharti has been issued the show cause for wrongful availment of Cenvat credit on non-specified goods like towers, shelters, etc, availment of Cenvat credit twice on the strength of same invoice and availment of credit without any supporting documents.
When contacted a Bharti Airtel executive said:��� This is an interpretation issue. When you put up a tower, or any other passive infrastructure, the industry is of the view that this is capital goods and therefore the telecom sector has been claiming the Cenvat credit for this.
The government, however, does not subscribe to the viewpoint that these are capital goods. All players in the industry have got similar notices and we will send our responses to the government. This is therefore an industry issue on the interpretation of the law by both sides. Whatever be the final outcome between the industry and the government on this issue, we will abide by it.���
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