Pursuant to a report tabled in the Parliament last year, the Comptroller and Auditor General (CAG) has recommended action to be taken against the Chhattisgarh Transport Undertaking (CTU) officials who failed to implement the relevant tax on the prescribed dates and did not collect service tax/GST from AC bus passengers.
This resulted in an unnecessary expense of Rs 5.89 crore for the government and added burden on the public without providing any corresponding service.
Section 66D of the Finance Act, 1994 was amended, resulting in the imposition of a 6% service tax on transportation of passengers by AC buses starting June 1, 2016. Additionally, GST at a rate of 5% was imposed on the transportation of passengers by AC buses starting July 1, 2017.
As per the amendment, CTU was responsible for charging a 6% service tax on passengers of AC buses until June 30, 2017, and a 5% GST on such services starting July 1, 2017. The CTU was also responsible for depositing the collected service tax/GST into the government account.
During the audit, the CAG observed that the CTU had not put into effect the laws, and had not taken any steps to collect service tax/GST from passengers of AC buses as of the required dates.
In July 2018, the Director General of Goods & Services Tax Intelligence conducted an inquiry and found that the CTU had failed to collect the service tax/GST from passengers of AC buses as of the prescribed dates. As a result, the CTU belatedly deposited (January-March 2020) service tax/GST amounting to Rs 5.89 crore (Rs 1.42 crore service tax for the period October 1, 2016, to June 30, 2017, and GST worth Rs 4.47 crore, for the period July 1, 2017, to January 15, 2020) using funds from the government exchequer.
However, the service tax for the period from June 1, 2016, to September 30, 2016, was not deposited due to the expiration of the five-year limitation period for recovery of tax under Section 73 of the Finance Act, 1994. Due to the CTU’s failure to collect service tax/GST from passengers, the CTU had to deposit the same using its funds from the Consolidated Fund of India that resulted in an avoidable outgo of Rs 5.89 crore from the government exchequer, as stated in the report.
The department stated that the CTU had commenced charging GST from the passengers with effect from January 16, 2020, after approval of enhanced rates of tickets.
After all of this fiasco, the department further stated that Rs 5.53 crore paid as service tax was being recovered from the passengers with effect from January 16, 2020, by increasing the bus fares, and costs of daily and monthly passes and rate of the concession tickets, which is unfair to the travelers in many dimensions.
The CAG noted that the department had incorrectly raised the fares for all buses, including non-AC buses, to compensate for the tax amount paid earlier from the consolidated fund of India. As a result, the department imposed a tax burden on those who had not used AC buses and also collected tax for previous years from passengers who had not actually utilized the service.
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