Drive reveals major service tax evasion

After cracking the whip on sectors like construction and hospitality, the service tax department of Mumbai-I commissionerate has launched a drive to curb the incidents of service tax evasion in spas, health clubs and beauty parlours. The drive has covered several places in the city, including Bandra, Colaba and Juhu. These search operations have revealed major tax evasion by well-known spa/saloons like Sabai Spa, Aura Wellness, Sukho Thai, Palm Spa etc. The department has also discovered that most of the spa/massage centres have been collecting service tax from customers, but not paying to the service tax department. Tax evasion to the tune of over '5 crore has been reported so far. According to a press release issued by the department, the Sabai Spa Pvt. Ltd. is registered with the service tax department and engaged in providing Thai foot services for the past five years. The company, which had collected service tax worth '1.04 crore (approx.), over the years, failed to pay the same to the department. Following the crackdown on the company by service tax officials, it paid '35 lakh. “Within a day, the company made applications declaring service tax liability of '80 lakh under the Voluntary Compliance Encouragement Scheme (VCES), 2013,” said the release. Further, the release stated the malpractice of other tax evaders such as Aura Wellness & Healing Services, which had evaded the payment of service tax to the tune of '98 lakh. “Our commissionerate urges all service tax providers to pay the service tax liability and also avail of the VCES, where they can get a waiver in the interest and penalty,” said Sushil Solanki, service tax commissioner-1, adding that in the coming days, many more service sectors were likely to be targeted by the department. However, this drive has invited severe flak from experts. CA Nagesh Dubey, an expert on taxation issues, said, “The service tax officials instead of prosecuting the defaulters, are encouraging them to pay the service tax amount in installments.”