service tax notice

[Prem Alag]

Dear sir / madam ,

I was teaching in a coaching classes on contract basis and as a full time faculty . As I was not aware any thing about service tax laws , I never claimed from company and never paid to government and did not even got myself registered under service tax laws .

Now after so many years i have received a notice from service tax department to pay service tax along with interest and penalty which comes to around 14 laks .computation from 2013 - 14 onwards

I am not understanding what to do . Is there any option with me or I will have to pay the same .

The officer has calculated service tax liability as to approx 8 lakh and the balance is interest and penalty .

pls suggest

Reg

Prem Alag

[KASTURI SETHI]

You are an employee of the coaching centre though on contract basis. The Coaching Centre is Service Provider and that centre is required to pay Service Ta x, if threshold exemption is crossed by the Centre. You are not required to pay Service Tax.

[DR.MARIAPPAN GOVINDARAJAN]

I endorsed the views of Shri Sethi. However it is required on what ground the demand is raised?

[KASTURI SETHI]

I think the querist has received a letter and not show cause notice. Normally people who are not linked with Service Tax do not find the difference between the two.

[KASTURI SETHI]

Relevant extract of Board's Education Guide released after 1.7.12

2.9 Provision of service by an employee to the employer is outside the ambit of service

2.9.1 Are all services provided by an employer to the employee outside the ambit of services?

No. Only services that are provided by the employee to the employer in the course of employment are outside the ambit of services. Services provided outside ambit of employment for a consideration would be a service. For example, if an employee provides his services on. contract basis to an associate company of the employer, then this would be treated as provision of service.

2.9.2 Would services provided on contract basis by a person to another be treated as services in the course of employment?

No. Services provided on contract basis i.e. principal-to-principal basis are not services provided in the course of employment.

AI Summary

Employee vs contractor distinction in service tax determines whether the employer or the contractor bears tax liability and penalties. Service tax liability depends on whether teaching services are rendered in the course of employment (outside taxable services) or on a principal to principal contract (taxable); the coaching centre will be the liable service provider if it crosses the turnover threshold, while an employee ordinarily is not separately liable; the nature of the communication (letter versus show cause notice) and the stated grounds affect interest and penalty exposure.