The Kolkata based Multi System Operators (MSOs) and local cable TV operators (LCOs) had uninvited guests last week. They were taken by surprise when the service tax officials conducted two raids to probe into their alleged financial irregularities. And, this in a digital addressable system (DAS) cable TV ecosystem which reveals the business and operations of these players at length.
Apart from service tax, the income tax department also searched the premises of one of the big MSOs. And if sources are to be believed, the MSO made an upfront payment of around Rs 50 lakh - Rs 75 lakh to the income tax authorities.
More than 350 cable operators have been issued summons for evading service tax payments for the past five years, sources said. “As per market reports two MSOs were raided last week, who then had to cough up huge amounts to the service tax authorities. The officials questioned the accountant of the MSOs on the financial details,” said a cable TV industry insider.
It is also learnt that another MSO who had evaded service tax amounting to Rs 15 crore - Rs 20 crore spanning over four years, had to cover up the case by paying a huge amount to the authorities. “It is learnt that the company deposited a huge amount, though I am unsure of the exact amount,” the source added.
Though the second MSO, whose office was raided on 29 August paid Rs 2.5 crore (approximately) to the service tax department officials. “Another Rs 50 lakh - Rs 75 lakh was given to the income tax department,” he informed.
“The raid was part of a probe into financial transactions for suspected alleged tax evasion by the cable TV operators in Kolkata,” he said.
A cable operator under Gujarat Telelink, an MSO, informed that as per the summons, the operator has to furnish details of the number of set top boxes installed and also the account details for the past five years. “If we don’t furnish it, we might be in trouble,” he said.
Cable industry sources inform that cable TV operators are liable to pay 12.36 per cent as service tax to the authorities from the subscription amount collected every month from the customers.
Kolkata based operators are treading in troubled waters. First it was the Telecom Regulatory Authority of India (TRAI) which planned to take strict action against the MSOs and LCOs for not collecting and feeding the CAF details into the system for DAS implementation and now they face the wrath of tax inspectors.