GST Authorities drop ₹7.08 Cr Service Tax Demand on CCI, says Commission not liable to register as GST Taxpayer

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In a favorable development for the Competition Commission of India (CCI), GST authorities have withdrawn a service tax demand of ₹7.08 crore imposed. The ruling clarified that the CCI is not obligated to obtain service tax registration, eliminating the service tax liability.

The ₹7.08 crore demand comprised ₹6.78 crore in service tax, ₹2.57 lakh in education cess, ₹1.28 lakh in secondary and higher secondary education cess, ₹15.52 lakh in Swachh Bharat cess, and ₹9.53 lakh in Krishi Kalyan cess.

This decision stemmed from a CGST Commissioner audit following an appeal by the CCI against a show cause notice issued by the Directorate General of GST Intelligence (DGGI), Delhi Zone. In 2020, the DGGI issued the notice based on an intelligence report alleging that the CCI had not paid service tax on fees received for its services.

The show cause notice emphasized that the CCI, involved in activities such as overseeing acquisitions and mergers, had not registered under the Finance Act or fulfilled its service tax obligations.

However, the recent ruling stated that as a body constituted by an Act of Parliament with accounts audited by CAG, the CCI is not liable for service tax registration, and consequently, no service tax demand persists.

Furthermore, the ruling clarified that penalties are not applicable when the entire demand is deemed unsustainable, citing established legal principles.

Given the statutory nature of CCI proceedings and its role as an enforcement authority under the Competition Act, the ruling asserted that the CCI’s functions do not qualify as “economic activity” subject to taxation statutes.

The CCI argued that its functions resemble those of a tribunal and that filing fees are for statutory assessment/enforcement, not taxable activities. Additionally, the CCI highlighted that international jurisdictions also charge fees for merger notifications without imposing service tax.

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