Service Tax Notices are issued for FY 2015-16 are illegal Show Cause Notices says CA Association

Extract of Letter of The Chartered Accountants Association

We would like to bring to your kind notice that The Chartered Accountants Association is representing Chartered Accountants and is a constituent body under the societies act. The functions of the Association include holding of talks, workshops, seminars and conferences on topics of professional interest with a view to help the members keep themselves abreast of the developments in the fast changing scenario, to represent members before various authorities etc.

You will appreciate the fact that in then linens of COVID-19 pandemic, the Government is taking all measures to make life easy for all citizens by relaxing the compliance burden and also by giving other Incentives. However these efforts are being negated by high headed and irresponsible working by some officers of the Central GST (Service Tax) Department in defiance of the fulfilment of four corners of law.

Central GST Department has been issuing Show Cause Notices (SCNs) for FY 14-15 for difference in Receipts as per Service Tax Return and Income Tax Return in bulk without going into the legality and without fulfilling the mandate given by the law for issue of such Show Cause Notices. Notices have been issued even to professionals like Doctors (Corona Warriors) who were not even liable to service tax levy.

Notices have been issued solely on the ground that receipts shown as per ITR are different as compared to receipts shown in service tax return. Further in case of persons, who were not liable to service tax, notices have been issued to make roving enquires on basis of their ITR. Notices are asking for plethora of information for 3-5 years. Assesses arc being harassed by such vague notices making roving enquiries.

The notices have been issued on basis of discrepancies in Income Tax and Service Tax even in cases, here Departmental audit has already been done. It is clear that notices have been issued blanket and without any due diligence leading to creation of unnecessary hardship for assesses. An attempt is being made by departmental officers to create disputes and demands for the reasons best known to them.

The Show Cause Notices (SCNs) have been issued with a pre- determined state of mind and in a prejudiced manner and have been issued with arbitrariness and vagueness. It is pertinent to mention here that the SCNs have been issued in an illegal manner as extended period of limitation cannot be invoked in the cases where no facts have been suppressed from the department with an intention to evade the payment of service tax. Accordingly, the entire period covered under the issued SCNs from April, 2014 to March, 2015 is barred by limitation.

Difference in receipts as per ITR and Service Tax or non-application of Service tax number does tantamount to any fraud leading to notices asking for 5 years old information. Enquiry up to 5 year can be made only if service tax has not been paid due to fraud, collusion, willful statement or suppression of facts. If receipts as per I. are no tallying, it does not mean there is fraud, collusion, willful statement or suppression of facts. There can be a number of reasons for the mismatch like cash or mercantile basis of the system, professionals, Other Persons not liable to service tax and so on.

Officers cannot make roving enquiries and issue notices beyond the limitation period of 1 year. However notices have been issued its bulk in defiance of law. Without recording any reason which indicates any fraud or misstatement, notices are being issued to one and all. Extended period of 5 years can be availed by Service Tax Officer only if he is satisfied that there if fraud or willful statement. However blanket notices have been issued to all without any satisfaction.

The officers dealing with notices are harassing the Assessee’s and asking for documents which they are not entitled to call for.

The SCNs issued mention various enquiry letters, which were never received by any assesses and have been wrongly mentioned in the SCNs, which also shows the arbitrary working of the department.

The extension in time limit till 31/12/2020 was provided for completion of pending proceedings or tiling of appeals etc and not to make roving enquiries and harass the assessees. Sending notices, calling for information more than 5 year old, is uncalled for. In many cases even when replies have been sent by mail or post, again notices are being sent and a situation is being created that assessee has to contact the relevant officer personally or through an authorized representative making mockery of the claims of the government for faceless resolution of issues.

In view of above submissions, the SCNs issued without force of law may kindly be filed without asking the Assesses to comply with the same as it would tantamount to their harassment and outflow of funds for compliance in this COVID period. It is also requested that a proper enquiry may also be made with regard to issue of these illegal show cause notices.

Copy to

The Honorable Prime Minster of India
The Revenue Secreutry
The Chairman, CBIC
The Principal Chief Commissioner, Chandigarh
The Principal Commissioner, Ludhiana
The Deputy/Assistant Commissioners at Jalandhar

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Selling Bitcoin? Know how much you have to pay Income Tax and GST in India

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. Over the course of bitcoin’s history, it has undergone rapid growth to become a significant currency both online and offline. Bitcoin has seen its value skyrocket to around $18,000 after dropping down to around just $4,840 in mid-March. The most significant development that may be supporting a potential sustainable growth trend for Bitcoin is the ongoing adoption of cryptocurrencies.

Taxation is an important aspect when it comes to understanding Bitcoins. There is a lot of ambiguity regarding the legal status of Bitcoins, thus it is very important to understand how the bitcoin traders are tackling the imposition of taxes on it. However, if you are wondering how to calculate the tax on it, here is what you should know:

Are bitcoins legal?

Bitcoin, as a medium of payment, has neither been authorized nor been regulated by any central authority in India. Further, no set rules, regulations or guidelines are laid down for resolving disputes that could arise while dealing with bitcoins. Hence, bitcoin transactions come with their own set of risks. However, given this background, one cannot conclude that bitcoins are illegal as, so far, there has been no ban on bitcoins in India.

How are bitcoins taxed?

The concept of bitcoins being quite new to the Indian market, and the government has not yet brought taxability of bitcoins into the statute books.
At the same time, the levy of tax on bitcoins cannot be ruled out because the Indian income tax laws have always sought to tax income received irrespective of the form in which it is received.
The bitcoin tax differs based on your holding. The first step is to see whether you were trading in it or holding it as an investment.
If it is an investment, then one will have to pay capital gains tax.
If you are trading in bitcoins, then it is a business income. So, if your turnover exceeds Rs 5 crore, you are liable for tax audit.

How can one classify bitcoins as trading or investment?

The income tax department has not specified the classification for trading and investment.
Taxpayers will have to consider multiple factors such as duration, frequency of the transaction, time spent on it and the intention of the transaction.
All this will determine whether it is an investment or business income.

What tax is applicable if a person invests in bitcoins?

If you are an investor, you have to pay capital gains tax.
Capital gains can be either short-term or long-term.
There is no provision for bitcoins and other cryptocurrencies in the Income Tax Act. In the absence of any provision, it is assumed that the general provision will apply.
Hence, if investor holds bitcoins for less than 36 months, short-term capital gains will be applicable.
If investor holds bitcoins for more than 36 months, long-term capital gains tax (LTCG) will be applicable
Short-term capital gains will be clubbed with your salary income and taxed at slab rate. In case of LTCG tax, you will have to pay 20% tax, with the benefit of indexation.

Let us refer to an example below to understand how LTCG is computed on sale of bitcoins

Suppose Mr A purchased some bitcoin units in January 2015 for Rs 1,00,000 and sold them in May 2018 for Rs 5,00,000. The holding period is above three years. The gains are called long-term capital gains and are taxed at 20% with indexation benefit.

The long-term capital gains are:

Original cost of acquisition = Rs 1,00,000
CII (Cost of Inflation Index) in the year of purchase = Rs 240
CII (Cost of Inflation Index) in the year of sale = Rs 280

Indexed cost of acquisition = 280 * (1,00,000) / 240 = Rs 1,16,666.
The sale price of the asset = Rs 5,00,000

Long-term capital gains = The sale price of the asset – The indexed cost of acquisition.

Long-term capital gains = Rs 5,00,000 – Rs 1,16,666 = Rs 3,83,333.
Tax on long-term capital gains at 20% = Rs 3,83,333 *0.2 = Rs 76,667.

Is GST applicable on Bitcoins?

GST can also be imposed on bitcoins. For it to apply on bitcoins, they need to fall under the category ‘taxable services’ which are defined as “services to any person by any person, in relation to online information or database access or retrieval or both in electronic form through computer network”.

GST or goods and services tax is applicable on the supply of goods and/or services. The sale of bitcoins therefore would attract GST if it falls within the domain of either goods or services.

It could be inferred, that the activity of Mining (process of adding transaction records to the bitcoin’s public ledger called the Blockchain) could be considered as a ‘taxable service’ under the finance act, because mining is one of the ways a person can legitimately earn his bitcoins with his proof of work.

GST on Bitcoin is very much a reality and those trading in the crypto currency should consider registration and compliance with GST. A contrary view , however, has been taken by several countries around the world which have either accorded the status of money to Bitcoin thereby exempting it from local GST. The government has not clarified in India the applicability of GST on Bitcoin still remains as per law of the land.

RBI banned cryptocurrencies in the year 2018 after several frauds. However, in March 2020 cryptocurrencies were declared legal in India. The government is holding talks with different ministries to bring in a law to ban cryptocurrencies.

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