Sebi faces Rs 500 crore service tax demand

India Inc has been complaining of excessive tax demand. It seems the taxman is not sparing even the regulators now.

Capital markets regulator Securities and Exchange Board of India (Sebi) has been asked to furnish its fee income details earned since 2012 till date by the service tax department. The tax department had issued several notices to Sebi to share the details for assessment of service tax liability 2012 onwards. As per initial assessment by the tax department, Sebi's service tax liability will be more than Rs 500 crore.

As per service tax department sources, Sebi, so far, was not ready to share the details. The tax department is of the view that any service which is outside negative list of service tax issued in 2012 is liable to pay tax. Service tax department issued negative list in 2012. Services of Sebi were not included in this list.

Sebi provides services for processing of IPOs, debt issues, mutual fund NFOs and other services including informal guidance to companies. None of these services is included in the negative list of services for taxation purpose. On this basis only service tax department has issued notice to Sebi officials and sought details.

However, Sebi sources have different version. They said the regulator is exempt from all sorts of taxation. According to Section 25 of the Act says Securities and Exchange Board from the date of its constitution to the date of establishment of the Board, shall not be liable to pay wealth-tax, income-tax or any other tax in respect of their wealth, income, profits or gains derived, they said.

However, sources in service tax department said that Finance Act has overriding effect on all the enactments in taxation related issues.

Sebi senior officials told Zee Business, "As per Sebi Act they have been exempted from income tax, wealth tax and all other taxes, which has been clearly mentioned in Section 25 of the Sebi Act. It's an old issue and we have clarified this issue to Central Board of Excise and Customs (CBEC) as well. We are waiting for CBEC response."

As per service tax department sources, a senior official of Sebi's treasury department was summoned last week by the department, which is hopeful it will get fee income details this month itself. The regulator has been asked to furnish details of fee income between 2012 and 2015.

Queries emailed to Sebi's communication department didn't elicit any response till going to the press.