PGCIL faces Rs 413 crore tax liability

Tax authorities have issued a show-cause notice to state-owned Power Grid Corporation (PGCIL) for non-payment of over Rs 413 crore service tax on power transmission services, but the company contested the claim saying it was bound by the norms set by power regulator Central Electricity Regulatory Commission (CERC).

“We are regulated by the CERC and the said amount of tax will be passed on to the consumers as an integral part of tariffs,” a PGCIL’s senior official said, adding that the PSU was heading for a legal opinion on tax authorities’ action.

The authorities have also charged PGCIL of suppressing the facts to evade service tax.

According to the service tax department of the Central Board of Excise and Customs, PGCIL has not paid service tax for the period from May 2006 to September 2008.

PGCIL, being a PSU company, cannot absorb the service tax because this is part of the tariff paid by end consumer, it said.

The notice said: “Service tax amounting to Rs 402.46 crore, education cess amounting to Rs 8.05 crore, Secondary and Higher Education cess amounting to Rs 2.65 crore (collectively amounting to Rs 413.16 crore) during the period from May 1, 2006, to September 30, 2008, appears to be recoverable from Powergrid along with interest for late payments.”

The power transmission company could also face a penalty with charges of “deliberately suppressing the facts with intention to evade payment of service tax”, the department pointed out in its notice.

In addition, other penalties PGCIL could face is for not getting the registration certificate under service tax rules for the taxable services, and ‘business and support services’ said the service tax department.