The Central Goods and Service Tax, Intelligence wing, raided over 30 city-based Infra companies including the GMR Infra Group, L&T Infrastructure and the Nagarjuna Construction Company Ltd., and detected large amounts of ‘unpaid’ service tax to the government as per the revised GST slabs for infrastructure contractors. The net worth of ‘upaid’ tax amounted to Rs 230 crore.
The sleuths of the Directorate General of Central GST (CGST) Intelligence wing, along with its sister organisation, the state GST, went on a series of raids from the end of July to August 10 against specific infra companies that bagged irrigation and road projects in Telangana, including multi-crore Kaleshwaram and Mission Kakatiya projects.
During the searches it was found that the contractors and subcontractors continued to pay only 5 per cent monthly interest to the government on the total project cost whereas the revised slabs were 12 per cent for contractors and 18 per cent for subcontractors respectively. Thus, the detected unpaid tax is not termed as ‘evasion’ but as ‘technical flaw’.
The sleuths have not detained goods or blocked operations but instead asked the contractors to pay the service tax along with a penalty. On August 11, the corporate offices of Transstroy India Limited, an engineering and construction company owned by TD MP Rayapati Sambasiva Rao, were raided in Hyderabad as the sleuths found service tax being paid in the 5 per cent slab.
Sources told this newspaper, “The raids in the city were part of the pan India operations being carried out by CGST. During the searches, sleuths checked for the monthly GST returns paid to the government by the company. Every business had certain statutory interest rate ‘service tax’ that had to be returned to the government as per the GST law. The sleuths verified if these returns were paid or evaded. They also identified that most infra companies lagged behind in GST payments because their bills were not cleared on time by the government.”
The sleuths of CGST have booked cases against companies failing to pay even the 5 per cent interest.
“For now, the contractors are being pressurised to clear the payment, failing which, a show cause notice will be issued and the adjudicating process will be taken forward. The judicial authority would be at the Commissioner’s level.” added the source. Meanwhile, because there is a confusion prevailing over the GST rate on government contract works, the act by contractors is deemed as ‘technical flaw’ and not ‘evasion.
The central government in a revised notification dated August 22, 2017, amended the GST rate to 12 per cent for contractors and 18 per cent for sub-contractors. This rate is applicable for ongoing as well as new contracts. As these companies did not receive any direction from the government to pay as per the revised slab, the infra companies were caught unawares during the raids. Recoveries of tax were made from some companies in Hyderabad.