GST notice to BBMP: Rs 200 crore service tax scare

The GST implemented by the Central Government with an intention of bringing uniform tax system in the country has caused BBMP to fear a service tax of Rs 200 crores to be paid, reported Kannada Prabha.

BBMP had invited tenders to take up contract for garbage disposal and there was no response from contractors for the same. Hence BBMP has been disposing garbage on its own, by engaging the services of private garbage disposal contractors.  They are considered as service providers. This has become a headache to BBMP as, according to the new rule, it has to pay service tax and the GST Vigilance Squad has issued a notice to BBMP in this regard.

As per the old rules, garbage disposal comes under essential services and was exempted from tax.  BBMP has always enjoyed tax rebate for this. But as per the new GST rules tax rebate can be claimed only if the garbage disposal is managed by a contractor. Any service provider managing this task will invite service tax. Hence GST vigilance squad has issued a notice to BBMP to provide the list of service providers and the bill of payment for them.

Speaking at a press meet Opposition leader Padmanabha Reddy said, the BBMP is not inviting tenders and assigning contract to them but is using the service providers. Hence it has to pay a service tax of Rs 200 crores on the actual Rs 800 spent on garbage disposal. The BBMP Commissioner has also confirmed the information and said the matter has been referred to the legal department and action will be taken only after they advice said BBMP Commissioner Manjunatha Prasad.

• GST rules BBMP to pay service tax
• Rs 200 crore tax on Rs 800 crore expenditure
• GST
• Karnataka