Prasar Bharti needn't pay service tax, says AG

NEW DELHI: The finance ministry may be forced to reverse its decision on levying service tax on Prasar Bharti, marking an end to the long-pending inter-ministerial dispute on the issue.
According to official sources, the attorney general has taken the view that Prasar Bharti is not liable to pay service tax, going by Section 22 of the Prasar Bharti (Broadcasting Corporation of India Act 1990).
The relevant section states that the Corporation is not liable to pay income tax or any tax in respect of profits and gains accruing or arising out of the fund of the Corporation or any amount received in that fund.
The levy can be imposed only if Section 22 of the Act is amended to specifically state that such exemption will not apply to service tax.
The AG was consulted after an opinion was sought from the Solicitor General on the Revenue Department''s ruling that Prasar Bharti was liable to pay service tax.
The Central Board for Excise and Customs issued a clarification last year saying that the exemption (under Section 22) would apply only to direct taxes and not indirect taxes.
It held that the argument that AIR and Doordarshan are not liable to pay service tax was incorrect
The SG''s opinion was almost on similar lines as that of the AG, said officials. The finance ministry may issue a clarification reversing its earlier stand.
Any broadcasting service is provided by selling time or duration slots. The advertisement charges or sponsorship charges received by the broadcasting agency are the consideration for services rendered and service tax is payable on this.
The service provider in this case is the broadcasting agency — AIR, private radio channels, Doordarshan, Indian or foreign TV channels. The revenue department''s stand was that a distinction cannot be made among service providers as far as payment of service tax goes. This was, however, contested by the ministry of information and broadcasting.
The amount budgeted as service tax revenue for the entire broadcasting industry is Rs 102 crore for the current year (revised estimates) and Rs 154 crore for the next fiscal.