KPMG gets notice for tax evasion

KPMG gets notice for tax evasion
Publication:Economic Times Delhi;
Date:Apr 25, 2008;
Section:Economy;
Page Number:10
Deepshikha Sikarwar NEW DELHI Consultancy firms have drawn the ire of the service tax department for alleged evasion. The department has issued show-cause notice to leading consultancy firm KPMG. It is understood that notices have been issued to some other firms of the same league in other cities. The show-cause notice to KPMG group of entities — KPMG (partnership firm), KPMG Advisory Services (P) Ltd, KPMG(I) Pvt Ltd, KPMG Resource Centre (P) Ltd, BSR & Co and BSR & Associates is for service tax totalling Rs 29 crore. The notice has been issued to them on foreign remittances made to entities abroad in respect of professional services received by them on out-of-pocket expenses billed by them on services wrongly claimed as export, on regulatory services and on membership fee during the course of investigation. KPMG group of entities have already deposited service tax amounting to Rs 4.38 crore and interest of Rs 42 lakh. This amount has been paid for period from June, 2005 to March 2007, when an explanation was added to the section 65(105) of the Finance Act, 1994, making such services specifically taxable. But, the department has alleged that the services provided in India by foreign service providers were always taxable and liability to pay tax was on service receiver since August 2002 when the service tax rules were amended. When contacted, a KPMG spokesperson said: “This is an accounting industry issue and not limited to KPMG alone. We believe we have paid taxes wherever applicable. We are examining the issue and will contest it based on merit and as per the law.” Earlier, the Delhi service tax Commissionerate is understood to have issued show cause notices to Ernst & Young group of companies for Rs 8.15 crore on reverse charge issue and out of pocket expenses. Some other consultancy firms have also been issued show cause notices in Mumbai and Kolkata on similar grounds.