People who seek police protection will now have to shell out an additional 18 per cent under the new tax regime
Each time the police go beyond regular maintenance of law and order and offer a service beyond constitutional duties, GST will be applicable. REPRESENTATION PIC
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The next time you reach out to the police for security cover, be prepared to dig deeper into your pocket. The service will now attract a levy of 18 per cent under the GST regime, which is to be paid on a reverse charge basis.
Senior officials from GST Bhavan said this charge would have to be borne by individuals/organisers seeking police protection or bandobast.
A senior official said, "Any service beyond the routine work of maintaining law and order and other constitutional duties for which a fee is charged will attract GST."
Sushi Solanki, former service tax commissioner, Mumbai, said the 18 per cent tax will have to be paid by the recipient of such services on a reverse charge basis as per Section 9 (dealing with levy and collection) of the Central Goods and Service Tax Act.
Sources said the Mumbai Police earns a huge revenue by providing protection for highly publicised events like the IPL as well as to film personalities, cash-laden bank vehicles, business firms and private individuals.
A senior Mumbai police officer said the charges for such services are fixed by the state home department. "They depend on the number of police personnel deputed and the man-hours spent on the services. The department also provides police security for demolitions undertaken by the BMC. All of the funds generated goes to the state treasury."
A senior IPS officer said on an average, the Mumbai Police generates over Rs 1.50 crore annually through such services. "Over Rs 75 lakh is collected for providing security during every IPL season."
The Mumbai Police earns Rs 75 lakh for providing security during every IPL season. Its protection unit comprises 400 personnel
Massive tax dues
The police department had so far written off the service tax (which has now been subsumed in the GST), which should have been in the range of 10-15 per cent, on their bills.
A senior home department official from Mantralaya confirmed that the police had not levied any service tax so far.
This waiving of service tax had landed the police department in trouble. The erstwhile service tax department (which is now part of GST Bhavan) had in 2011 slapped the Mumbai Police with show-cause notices for defaulting on service tax payments amounting to Rs 85 crore from 2006-11. The police challenged this before the excise, customs and service tribunal. The case is still pending before the tribunal.
A highly-placed official at the Mumbai zonal office of GST Bhavan said, "The notices were issued under Section 73 (recovery of service tax not levied or paid or short-levied or short-paid or erroneously) of the Finance Act, 1994, to both Mumbai Police and Navi Mumbai Police, but instead of setting their dues, they approached the tribunal."
The official said despite the change in the tax regime, "all matters related to service tax which are before tribunals" will be dealt with. "We will follow the tribunal's order as and when it comes. If the verdict goes against the petitioner, then it will have to pay the dues with interest and penalty."
Solanki said the notices were issued following numerous reminders to the police department, copies of which were also sent to the state home department (which controls the police force). "There was no response from either party."
Solanki said it was only in 2006 that commercial services rendered by the Central Industrial Security Force (CISF), the Central Reserve Police Force (CRPF) and the police force were put under the service tax slab.
Asked how the erstwhile service tax department arrived at the whopping amount of Rs 85 crore, he said, "We have taken into consideration the value of services available with the service tax department and have arrived at the dues, which include penalties for delayed payment until 2011, as per the rules of the Finance Act."
More trouble brewing
There is more trouble headed the Mumbai Police's way. Not only had it failed to procure the mandatory service tax registration number all these years, but is also yet to do the same with GST. Annual tax returns will have to mention the GST registration number, said a senior GST official.
Archana Tyagi, joint commissioner of police (administration), said, "We are yet to get a notification on implementation of GST. After studying it, we will take appropriate steps as per the rules." She refused to comment on the pending dues of Rs 85 crore, saying the matter is sub-judice.
How other agencies fare
Rajeev Rai Bhatnagar, director general of CRPF, said, "I am with my jawans at this moment, and off-hand, I won't be able to tell you the number of private businesses to whom we provide security cover as well as the charges."
R K Pachnanda, newly-appointed DG of Indo-Tibetan Border Security Force (ITBP), was not available for comment. A senior official confirmed that ITBP provides security some current and former politicians, especially those in Jammu and Kashmir. They, however, do not levy any charge for such services as they are deputed by the Centre. "One battalion's (comprising 1,000 personnel) annual charges amount to Rs 4 crore, and a company's (100-110 personnel) Rs 35 lakh. But the bills are taken care of the ministry of home affairs (police finance division). We had even provided round-the-clock cover to terrorist Ajmal Kasab. But, the bill of Rs 13 crore was waived following a request from the Maharashtra government. We are yet to get a notification on GST."
O P Singh, director general of CISF, was not available for comment. A senior CISF official said they provide security to 340 installations, including 59 airports, oil refineries, docks, sea ports, ONGC, the Infosys campus, Reliance Knowledge Centre and Reliance's Jamnagar plants. "Usually, we deploy an officer of the rank of assistant commandant having charge of 100 personnel, and bill the establishment accordingly. We are yet to get a communication on GST."
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