Rs 70-crore service tax rap on Microsoft

In the first case of its kind, the Customs Excise and Service Tax Appellate Tribunal has directed the Indian arm of software giant Microsoft Corp to deposit Rs 70 crore as service tax after it was charged with evading the tax last year.

In the first case of its kind, the Customs Excise and Service Tax Appellate Tribunal has directed the Indian arm of software giant Microsoft Corp to deposit Rs 70 crore as service tax after it was charged with evading the tax last year.

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Microsoft India had moved the Tribunal after the Delhi Service Tax Commissionerate asked the company to pay Rs 127 crore service tax for 2006-7, and also imposed a penalty of another Rs 127 crore.

A Microsoft spokesperson said: “We are reviewing the order, and continue to evaluate all possible alternatives to resolve this matter. We believe that we are in compliance with our obligations under Indian tax laws.”

The Delhi Service Tax Commissionerate had observed that since the services were provided and delivered in India, the company will have to pay the tax as these were covered under the business auxiliary service. In 2005, a separate set of rules for export of services had been prescribed by the government, according to which, the services consumed within India will not be treated as exports.

Microsoft India, however, was not paying the tax on these services, saying they were exports.