Sapna Makhija (Lawyer) 15 March 2009

service tax matter

There is a company ABC and its proprietor is Mr. X

Mr. X gave his personal PAN card number to get service tax number for company ABC.

This comapany ABC renders courier services for last 3 years. It acts as a mediator courier company i.e. collets the courier from a nationalised bank and passes it to some other courier company.

Bank makes the payment after deducting TDS in the name of ABC company.

1. As per the rule, it is compulsory to levy service tax on courier. However, the company ABC has not taken any service tax from the bank and hence not deposited with the government. The reason is simply to avoid double charges i.e. as the ABC company passes the courier to other courier company, that courier company charges service tas from

ABC company, so ABC company does not collect service tax from the bank. In other words, ABC company never collected service tax from the bank as it was collected from the ABC company by the other courier company.

why twice service tax on the single transaction.

2. Further, Though the company could have filed NIL return, it has not filed any IT Return for last 2 years. So, what can be done?

3. After 3 years, same bank, same ABC company, but the Proprietor changed. Now the proprietor is Mr. Y. so PAN card changed. ABC gets TDS certificate with different pan card number. But, TDS certificate does not contain service tax number of earlier pan card holder.

can properietor ship be changed in the service tax number? instead of getting it cancelled and to apply for a new one. how to resolve the whole issue?

Thanks and regards,

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2 Replies

A V Vishal (Advocate) 15 March 2009

Ms Sapna:

As for Q 1 raised by you, the courier company should had levied service tax from the bank if the services are liable to S T. Moreover, your client company is paying S T to the other courier company, had it collected S T, then it could have been netted against the service tax paid by it to the other courier company, by not doing so it has incurred loss to the extent of tax paid on behalf of the bank. There is no double taxation in this case, had the other company contracted with the bank directly then they would had collected the same and the bank would had paid it.

As far as your second query is concerned, kindly let me know the turnover of the company, since it determines whether the company is liable to Service Tax. Even if the company has not filed NIL returns it should not be a problem.

For Q 3, I suggest that the new proprietor registers the firm fresh with the Department, since the ownership is transferred there is no procedure for a proprietory concern to transfer its S T Registration.

The TDS certificate has to be issued in the new owner PANo. TDS certificate doesnot contain S T No. since Service Tax is indirect tax and TDS which is issued for Income Tax is a Direct Tax and there is no connection between the two.

As far as the last para is concerned there cannot be transfer of ST registration and hence fresh registration has to be invariably obtained.

Shyam Lal Naik (Service) 16 March 2009

ABC is not a company and is a proprietorship. ABC does not have a separate legal identity. It is the Proprietor's PAN, which is relevant for all purpose. Infact, a proprietorship can not have a separate PAN of it's own.

Service tax is a multipoint tax system. To avoid double taxation, there is a mechanism of tax credit in the form of Cenvat Credit.

So far as filing IT return is concerned, if the proprietor has Gross Taxable Income(ie. before any deduction under Chapter VI of IT Act) is equql to or below the threshhold exemption limit, it is not cumpolsory to file IT Return. On the other hand, if the GTI is above threshhold exemption, the proprietor must file IT Return. Fine of Rs. 5000.00 can be levied by the assessing officer. However, IT Return must be filed to claim refund of the TDS.