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GSTN survives Service Tax scare as Union Budget rescues it

Published: Feb 01, 2018

By TIOL News Service

NEW DELHI, FEB 01, 2017: EXACTLY a year ago, newspapers/news sites were agog with the sensational news that the Goods and Services Tax Network (GSTN) that is creating the Information Technology (IT) backbone for the new indirect tax regime, is under scrutiny for probable service tax evasion, by the CBEC.

The Superintendent (S&I), Service Tax, Delhi-I, had apparently issued a summons on 11/14.02.2017 u/s 14 of the CEA, 1944 to the CEO, M/s GSTN asking him to appear in person or through a representative on February 22, 2017 and produce balance sheets, bank statements and income tax return forms of the company for the FY 2012-13 to 2015-16.

"Whereas a case against M/s Goods and Service Tax Network, under the Chapter V of the Finance Act, 1994 (Service Tax) is being investigated by me/under my order," the summon emphatically mentioned.

The summons also asked the company to produce details of receipts of funds from the Central government, copy of agreement signed/entered with M/s Infosys for designing the system and details of payments made to M/s Infosys.

Incidentally, GSTN was set up as a non-profit, non-government company on 28 th March 2013, with 51 per cent stake owned by banks and financial institutions.

What happened thereafter is anybody's guess.

But the fact of the matter is that this year's Budget has some good news for GSTN.

Clause 104 of the Finance Bill, 2018 says -

(1) Notwithstanding anything contained in section 66B of Chapter V of the Finance Act, 1994, as it stood prior to its omission vide section 173 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the said Chapter), no service tax shall be levied or collected in respect of taxable services provided or agreed to be provided by the Goods and Services Tax Network to the Central Government or the State Government or the Union territory Administration, during the period commencing from the 28th day of March, 2013 and ending with the 30th day of June, 2017 (both days inclusive).

(2) Refund shall be made of all such service tax which has been collected, but which would not have been so collected, had sub-section (1) been in force at all material times: Provided that an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2018 receives the assent of the President.

(3) Notwithstanding the omission of the said Chapter, the provisions of the said Chapter shall apply for refund under this section retrospectively as if the said Chapter had been in force at all material times.

The long and short of the above is -

++ Services provided or agreed to be provided by the Goods and Services Tax Network (GSTN) to the Central Government or State Governments or Union Territories administration are proposed to be exempted from service tax for the period commencing from 28 th March 2013 and ending with 30 th June 2017.

At long last, there is something for the GSTN to cheer about!

Thankfully, under GST, the services provided are exempted -

Kindly refer the following notification-

12/2017- Central Tax (Rate), Dated: June 28, 2017


Heading 9984

Services provided by the Goods and Services Tax Network to the Central Government or State Governments or Union territories for implementation of Goods and Services Tax.



And similar exemptions under Notifications -

9/2017-Integrated Tax (Rate), Dated: June 28, 2017 (serial no. 53)   & 12/2017- Union Territory Tax (Rate); Dated: June 28, 2017 (serial no. 51)

As the saying goes, All's well that ends well.