No reversal of norm to arrest service tax evaders, says Chidambaram

NEW DELHI: Finance minister P Chidambaram has shrugged off concerns, within Congress and the Opposition, about his budget proposal empowering officials to arrest service tax evaders. In an interaction with Congress MPs on Friday, Chidambaram made it clear that there was no going back on the proposal in the budget to introduce Section 91, which will empower officials to arrest those who fail to pay to the government service tax exceeding Rs 50 lakh.


According to a person familiar with the details of the meeting, an MP from Andhra Pradesh raised the issue at the meeting, saying the proposal would lead to harassment of service providers such as beauty parlour owners, smalltime event management companies and public relations firms.

The MP said the measure would bring back ‘inspector raj’ and also lead to evaders bribing officials. Chidambaram, however, said failure to pay service tax amounted to these individuals illegally keeping government money and asked how that could be pardoned, indicating that he continued to back his proposal.

MPs across parties have opposed the proposal, which entails arrest by an official not below the rank of superintendent of central excise and imprisonment of up to seven years. Though Chidambaram tried to convince his party colleagues, BJP looks set to oppose the proposal when the finance bill comes up for discussion in Parliament.

What seems to be lost in the debate is the fact that a firm which has generated Rs 50 lakh worth of service tax cannot be in smalltime business.