Service tax litigations have risen substantially in recent years and that may be because of the absence of a pan-India Goods and Services Tax (GST) regime that can potentially remove several ambiguities around indirect taxation, experts maintain.
A total of 75,314 litigations were pending with the Department of Revenue, the Supreme Court, state high courts, specific tribunals and settlement commissions in 2014-15 with revenue implications of as much as Rs.1,51,414 crore, according to India’s official auditor.
Senior officials in the finance ministry, as also stakeholders outside — notably professionals in taxation laws — feel many of the issues in indirect taxes like on double taxation, were arising in the absence of GST.
“The scope of service tax litigation will be definitely curtailed once GST is implemented. There are certain grey areas in the existing laws around service tax, that is leading to many litigations,” a senior finance ministry official told IANS.
“It’s a consensus — that GST will be the solution to preventing service tax litigations.”
The reasons are many: Some service tax items have been vehemently opposed. Courts have put on hold such levies, like on legal services provided by advocates. Industry is crying foul over such tax on transporting goods by vessels, saying it amonts to double-levy, after having paid customs duty.
Thus far, however, the bill to bring the GST regime into force is stuck in parliament.
Tax litigation firm Advaita Legal said that service tax litigations have risen much more than excise and other tax-related cases. “We are on way to seeing more such cases. GST would have taken care of all these issues,” the firm’s partner and national head Sujit Ghosh told IANS.
Associated Chambers of Commerce and Industry of India (Assocham) also asserted that service tax litigations are heading towards a rise, if not addressed timely. “The current taxation concepts are vague. Many lead to double taxation,” said J.K. Mittal, co-chair of its indirect tax panel.
“Looking at the pendency in courts, service tax litigations have taken predominance. GST won’t completely eradicate litigation. But yes, because of simplifications and removal of ambiguities, it should lead to less litigations,” PricewaterCoopers India partner Amit Bhagat told IANS.
“GST is agnostic to any kind of exemption. It is intended to simplify things,” Bhagat said. “Let’s see how it pans out.”