Gap International booked for evading service tax of Rs 8 Crore

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Gap International booked for evading service tax of Rs 8 Crore

AIT News Network

NEW DELHI M/s M/s Gap International Sourcing (India) Pvt. Ltd has been booked by service tax department for evading service tax on BAS(Business Auxiliary Service) Provided by it.

Section 65 of the Finance Act, 1994 as amended defines “Business Auxiliary Service” as under:

“business auxiliary service” means any service in relation to, —

(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or

(ii) promotion or marketing of service provided by the client; or

(iii) any customer care service provided on behalf of the client; or

(iv) procurement of goods or services, which are inputs for the client; or

Explanation.— For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “inputs” means all goods or services intended for use by the client;

(v) production or processing of goods for, or on behalf of, the client;

(vi) provision of service on behalf of the client; or

(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,

and includes services as a commission agent, but does not include any information technology service and any activity that amounts to “manufacture” within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944).

Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, —

(a) ”commission agent” means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person —

(i) deals with goods or services or documents of title to such goods or services; or

(ii) collects payment of sale price of such goods or services; or

(iii) guarantees for collection or payment for such goods or services; or

(iv) undertakes any activities relating to such sale or purchase of such goods or services;

(b) “information technology service” means any service in relation to designing, or developing of computer software or system networking, or any other service primarily in relation to operation of computer systems;

“taxable service” means any service provided or to be provided,-

(zzb) to a client, by any person in relation to business auxiliary service;

Service Tax Commissionerate Delhi on 9.1.2008 has already issued a Show cause notice to M/s Gap International Sourcing (India) Pvt. Ltd., demanding service tax amounting to Rs. 8.06 Crores.

M/s Gap India is providing Business Auxiliary services in respect of vendor development, Merchandising, Quality Assurance, Logistic Support Services etc. in India in respect of the Garments being procured from India, by its parent company i.e. M/s Gap International Sourcing Inc. U.S.A.

During the period under dispute, services were being rendered into India and being delivered and used in India. In spite of this, Service tax was not being paid by M/s Gap India on the pretext that the entire services of their company were exported.

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