New Delhi: The finance and labour ministries
have locked horns over the issue of bringing retirement fund
manager EPFO under the service tax net.
The Central Board of Excise and Customs has slapped a
notice for recovery of service tax on Employees' Provident
Fund Organisation (EPFO) but the Labour Ministry has opposed
it saying the organisation was not doing any commercial
activity.
"Our stand is very clear that EPFO is not doing any
commercial activity so its services provided to employees
cannot be brought under the service tax net," Minister of
State
for Labour Harish Rawat told a news agency.
EPFO manages a corpus of about Rs 2.57 lakh crore with
subscribers' base of over 4.5 crore.
According to the CBEC notice EPFO comes under the
service tax net as it was providing fund management services.
Rawat said, "We do not charge anything from employees.
They get all services free of cost. Moreover, it is a
mandatory social security scheme for the beneficiaries and a
large number of those are low-paid workforce."
"If you think that EPFO is earning something out of
managing retirement fund. It is wrong. It is true that we do
(take) charge from employers. Besides, them government also
contributes in this fund", he said.
Managing retirement fund of the employees free of cost
is under the directive of Parliament, Rawat added.
However, CBEC thinks the otherway round. It pointed out
in its notice that EPFO provides fund managment service to
employers and charges service tax from them. Thus, service tax
should be levied.
The CBEC claimed that EPFO evaded service tax of Rs 461
crore during 2004-05 to 2007-08, excluding penalities.
The total tax demand could be around Rs 1,200 crore,
including penalties for non-payment of tax and service tax for
2008-09 and 2009-10.
Bureau Report