Date:11/11/2008 URL: http://www.thehindu.com/2008/11/11/stories/2008111159010300.htm

Andhra Pradesh - Hyderabad

GHMC not to pay service tax on ad fee, rents

Municipal corporation says it does not provide any service and so should be exempted

HYDERABAD: The GHMC contended that it was neither liable nor entitled to pay service tax to the Department of Customs and Excise on advertisement fee collection and rents since it does not provide any service. The municipal corporation was earlier slapped with a show cause notice for non-payment of service tax.

The Customs and Excise Department has warned that precipitate action would follow since its demand notices were being ignored over the years. The department wanted tax to be paid on the advertisement fee being collected from various ad agencies for putting up hoardings, signboards, rentals and others.

Revenue from such sources was to the tune of Rs. 50 crore and the department had demanded 12 per cent of it be paid.

Taken aback at the notice, senior officials of the GHMC’s finance wing went through past records, held confabulations and took the decision of not to pay.

“We have been paying service tax on outsourced works estimated at Rs. 100 crore but not on advertisement fee,” said Additional Commissioner (Finance & Advertising) B. Ramesh Babu. The municipal corporation was also not sure whether other civic bodies were paying the service tax on advertisement fee.

In a communication to the Joint Commissioner, Customs & Excise, the GHMC stated that it only accords permission to ad agencies that actually provides service to the commercial companies.