Jet flies into Rs400 crore tax trouble

Mumbai: The Directorate General of Central Excise Intelligence or DGCEI, the agency responsible for monitoring evasion of excise and service tax, has issued a show-cause notice to Jet Airways (India) Ltd, the country’s second largest private carrier, relating to a potential service tax liability of at least Rs400 crore, according to two agency officials familiar with the development.
The service tax liability pertains to the import of services by Jet over the past five years.
The two officials asked not to be named because they are not the official spokespersons for DGCEI.
A show-cause notice is not an indictment, and only requires a company—Jet Airways, in this case—to explain its position.
In an email statement, a Jet Airways spokesperson said: “Jet Airways shall respond to the authorities concerned after examining the legal position.” She did not divulge further details.
Mint has reviewed a copy of the show-cause notice.
According to the DGCEI officials, the show-cause notice, issued in April, covers tax liability of 23 services that were imported. The officials declined to disclose the nature of services availed of by the carrier.
Typically, a company is given a month to respond to such notices but it can always ask for an extension. Jet Airways is yet to respond to the notice.
Jet Airways has been served the notice under the so-called reverse charge mechanism. Under this, it is the recipient of services, and not the provider, that needs to pay tax.
The reverse charge mechanism, which was introduced in 2002, stipulates that in case a non-resident Indian who does not have a business establishment in India offers such a service, the recipient of such services will have to pay the tax.
Subsequently, this rule was expanded and the concept of import of services was introduced to cover services provided to an India-based entity by an entity based outside the country.
In 2006, the government defined what it meant by the import of a service and started treating the recipient of such service as a deemed service provider, liable to pay tax.
24/06/09 Khushboo Narayan and P.R. Sanjai/Livemint

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Categories: Foreign Jun 2009, Jet Airways Jun 2009