The service tax department of Mumbai has slapped a Rs 75 crore tax demand notice on the Securities and Exchange Board of India (Sebi) after getting nod from the finance ministry and the Central Board of Excise and Customs (CBEC).
In the first week of April, the service tax department had issued a showcause notice to the market regulator. The demand notice is for the period from July 1, 2012, to March 31, 2015.
Last year the service tax department has sought details from Sebi about the income generated from their services since July 2012. At that time the tax department estimated Rs 500 crore of tax liability, which has come down to Rs 75 crore after inspecting books of Sebi.
In 2015, Sebi has knocked the doors of the Central Board of Excise and Customs and the finance ministry seeking exemption from service tax. However, CBEC had backed the service tax department holding that the Sebi was liable to pay the tax. A senior CBEC official told dna: “Since services provided by the stock market regulator were not specifically exempted from taxation or kept in the negative list, they were liable to be taxed.”
Sebi had then asked the finance ministry to intervene and sought a clarification from the ministry over the conflict of interest on the department’s tax assessment.
However, the ministry backed the tax department and gave its nod to investigate the matter and initiate course of action.
In 2012, the finance Bill was amended to introduce the negative list of services.
The Sebi Act says Sebi from the date of its constitution to the date of establishment of the Board, shall not be liable to pay wealth tax, income tax or any other tax in respect of their wealth, income, profits or gains derived. However, the service tax department has refuted Sebi’s claim saying the finance Bill has overriding effect in matters of taxation.
Sebi did not respond to a questionnaire sent on Monday.
The service tax department issued one more showcause notice during the period of April 1, 2015, to March 31, 2016. A senior service tax department official told dna, “We are assessing period of last fiscal year too and very soon will issue showcause notice for this period.”
Finance bill exempted Sebi and other regulators from service tax from April 1, 2016. Another service tax official said, “In this Budget regulators are exempted from service tax but they have to pay earlier dues with penalty as per the norms”.
Sebi earns revenues from initial public offers, new fund offers and registration fees of brokers.