The Corporation, in contravention to the provisions of the Service Tax Act, did not levy and collect Service Tax from passengers of AC buses which resulted in a loss to the Public Exchequer amounting to Rs. 18.31 crore.
The service of transportation of passengers by stage carriage was exempted from the Service Tax as the same was included in the Negative List. However, by amendment (1 March 2016) in the Negative List, the Government restricted the exemption to the services of transportation of passengers only by non-air-conditioned buses w.e.f. 1 June 2016. Therefore, the service of transportation of passengers by Air Conditioned (AC) buses was brought into Service Tax Act w.e.f. 1 June 2016. Accordingly, the State Transport Corporations were required to levy and collect Service Tax from the passengers of such AC buses and deposit the same with the Government.
Uttar Pradesh State Road Transport Corporation (Corporation) is engaged in the business of transportation of passengers by AC stage carriages (both its own AC buses as well as the hired AC buses) on different designated routes and was required, in light of the above amendments, to levy and collect Service Tax from passengers of such buses. On the advice of the service tax consultant of the Corporation, the Finance Controller (FC) brought (June 2016) this fact to the notice of the Chief General Manager (CGM) Operations and directed him to ensure compliance with the amended provision of the Service Tax Act. FC further reminded (December 2016) CGM Operations that as no action has been taken by the CGM Operations hence he would be personally liable for any liability arising in the future.
Audit noticed that CGM Operations, despite amendment in the Service Tax Act as stated above and express directions from the FC to this effect, failed to comply with the same. The Corporation earned a total revenue of Rs. 305.23 crores from the operation of AC buses during the period from June 2016 to June 2017. Non-levy and collection of Service Tax resulted in a loss to the Government exchequer amounting to 18.31 crore (15 percent of 40 per cent1 of ` Rs. 305.23 crores). Further, non-collection and deposit of Service Tax may also attract penal proceedings under the provisions of the Service Tax Act.
The Management accepted (June 2019) the audit observation and stated that the process of determination of liabilities of Service Tax payable and its payment has been initiated.
However, no liability has been fixed so far by the Corporation against the CGM Operations for not initiating timely action to levy and collect Service Tax.
The matter was reported to the Government (August 2018). The reply is still awaited (September 2019).