By Ishant Gupta
The intelligence wing of the revenue department has launched an investigation into the relations between four public sector banks and ATM service providers which have been accused of colluding so as to avoid paying the VAT. The banks that have been charged are the Punjab National Bank, the State Bank of India, Canara Bank and Syndicate Bank. The ATM service providers involved are NCR, Tata Payments Solutions, AGS transact and Hitachi.
The DGGSTI (Directorate General of Goods and Service Tax Intelligence) has sent letters seeking information about the case to the concerned banks and ATM service providers. According to a report by The Economic Times, the contents of the letter asked the ATM service providers to provide information relating to irregularities in the cenvat credit which is applicable to ATM transactions.
The root of the allegation
The underlying root of the fraud is the Cenvat Credit System. This is a scheme under which tax benefits are provided to a manufacturer or service provider for tax paid on services used in processing the final product or services. Under the previous tax regime, banks were given tax benefits in case of the service tax but not in the case of the Value Added Tax. The most recent problem has arisen due to the different circumstances under which Vat and the Service Tax are charged.
In case of ATMs, if the service provider facilitates only the ATM, then only VAT is applicable. Whereas, if the service provider also takes care of the security guard or the maintenance of the ATM, cash replenishment or other auxiliary services, then the Service Tax is applicable.
Information seeker: DGGSTI
The DGGSTI has asked for different kinds of information from the service providers then what is being asked for from the banks. The service providers are being asked to give details of all the services they provided to the banks, including invoices, information regarding the service tax paid, any agreements or other documents detailing the terms and conditions of outsourcing of the ATMs, and last but not the least the annual financial reports for the period 2013-2017.
Although most of the banks submitted their information in February, some were not happy with the authorities. SBI, responding to the allegations, stated that the query by the DGGSTI does not take into consideration irregularities on its part. Officials at the DGGSTI said that the investigation has been going on for the past four months and not only the ATM service providers but also the organisations providing the software, security and other auxiliary ATM services were being looked into. However, now that the ATM service providers are providing the requisite information the conclusion of this whole episode may be at hand.