The Income Tax (I-T) department is probing civic contractors and builders for alleged tax evasion on credit notes issued by the BMC during the Covid-19 pandemic lockdown. The taxmen had issued notices to the BMC asking for details of the credit notes valued at Rs 415 crore utilised by contractors. The three contractors under probe had further sold the credit notes at steep discount to prominent developers to settle their dues.
Earlier last week, the GST department had cracked down on the controversial BMC credit note policy where payments to builders of Rs 450 core were made through credit notes for construction of 35,000 project-affected persons’ (PAP) tenements. The payments are under scanner for non-payment of GST.
'No GST paid on credit notes commercial transactions'
The BMC had issued credit notes to builders who sold it to other prominent city developer to settle their civic dues. “No GST was paid on the credit notes commercial transactions involving negotiable instruments (credit note) attracting GST of up to 18 per cent,” confirmed a senior GST official.
The BMC policy to issue credit notes was aimed at tiding over the revenue crisis during the Covid-19 pandemic lockdown. These were issued to BMC developers or land owners to construct residences for project-affected people.
BMC shrugs responsibility
The I-T sleuths are probing contractors and builders for alleged tax evasion by hiding credit note income to their taxable component. However, BMC officials shrugged any responsibility on GST and Income Tax liabilities stating that the onus of making such payments was on the contractor or builders. “The finance department had issued digital credit notes to avoid breaking fixed deposits to pay for the PAP projects. Developers are now re asked to purchase land to build houses for project affected people and lieu of the payment credit notes were given along with the transfer of development rights,” explained senior civic official.
The developers could sell the credit notes to other builders to recover expenses for a profit and could be used only to settle the BMC tax and FSI premium payments.
BMC chief accounts had objected to the credit note policy citing legal hurdles with no provision for such a policy in Maharashtra Regional and Town Planning Act. The state urban development department rejected the BMC objections citing MMRDA precedent for resettlement of project affected people.
