Spas in the dock over service tax evasion

Drive resulted in searches at more than 40 places covering spas, health clubs, salons in Bandra, Colaba, Juhu

Service tax authorities in Mumbai found evidence of tax evasion amongst a number of spas and health clubs located amongst the financial capital’s poshest locales. 

 

The drive resulted in searches at more than 40 places covering Spas, Health Clubs and Beauty Parlours in areas including Bandra, Colaba and Juhu. 

 

"It is interesting to find that most of these Spa/Massage Centres have been collecting Service Tax from customers, but not paying to the Service Tax Department.  Tax evasion of about more than Rs. 5 crores have been detected," said an official release from the tax authorities

 

Popular chains which were found to have defaulted include Sabai Spa, Aura Wellness & Healing Services and Sukho Thai India. They were found to have defaulted by Rs.1.04 crore, Rs.98 lakhs and Rs.40 lakhs respectively. In the case of Aura, it was also found that franchisee outlets in Mumbai have evaded Service Tax amounting to approximately Rs. 86 lakhs. 

 

Sabai has been registered with the Service Tax department and been in the business for five years. It collected money for all these years but did not pay up, according to the authorities. They so far made a payment of Rs.35 lakhs following the searches and made an application for paying a further Rs.80 lakhs under the Voluntary Compliance Encouragement Scheme(VCES) which allows defaulters to pay the outstanding tax without penalty or interest. 

 

Aura  have so far paid Rs.30 lakhs while Sukho has paid Rs.10 lakhs.

 

Other Spas like Black Burrberry at Colaba, Kaasha Spa at Worli,  Mudd Salon at Bandra, Palm Spa at Colaba have also been found to be evading Service Tax and inquiries are under process, said the note.   

 

Restaurants and the Construction sector had drawn the taxman’s eye earlier and others are on the list, suggested the statement. 

 

“Service Tax Commissionerate urges all the Service Tax providers to pay the Service Tax liability and also avail the facility of VCES under which they get waiver of interest and penalty also.  In the coming days, many more Service sectors are likely to be targeted by the department,” it said.