Several financial services companies have started receiving written enquiries from tax officers based in small towns seeking details around organisational structures, revenues and Goods and Services Tax (GST) paid. A spurt of such notices has spooked companies that fear this could increase their compliance burden.
Companies have been under scrutiny from indirect tax offices as far apart as Kolhapur, Rajahmundry, Vijaywada, Mysore and Mangalore. ET has viewed a notice issued to a company from one of these locations.
Under the GST framework, companies are required to have a registration in every state and in most cases queries, if any, are raised by tax officials based in the city where it’s registered. However, mofussil tax officers are taking refuge under a particular section in the GST framework interpreted to mean that any indirect tax official can question any transaction of any company from any part of the country.
“Provide brief note of organisational structure, details of turnover whether taxable, exempt, nil rated or non-GST turnover.. details of place of supply,” reads a written query sent to a financial services company in Mumbai.
Industry trackers said in most cases companies are already complying and providing details to tax officers based in the capital of the same state.
“The compliance requirements in GST for service providers are significantly higher than the erstwhile service tax regime and the need to respond to inquiries from various parts of the country leads to additional pressures on businesses. A single authority should be empowered to enquire/investigate all GST issues of a service provider instead of multiple authorities, which will lead to efficiencies on both sides,” said MS Mani, partner, Deloitte India.
Take the instance of Andhra Pradesh. All the companies present in the state have registered in Hyderabad, but the notices have started coming from indirect tax officials from smaller towns in the state.
“The jurisdiction has been a subject matter of debate and in an ideal situation the jurisdictional officer should seek information related to compliance, procedure and other legalities,” said Abhishek A Rastogi, partner, Khaitan & Co.
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