Services tax on chartered accountant services

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Querist : Anonymous

Querist : Anonymous (Querist)

06 February 2016 whether chartered accountant services comes under continuous supply of services under service tax.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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06 February 2016 The nature of professional services rendered by Chartered Accountants is not continuous supply of services, even though the professional may be involved round the year in the affairs of the client.

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2016 Can you please justify why chartered accountant services are not treated as continuous supply services.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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13 February 2016 Rule 2 (c) of Point of Taxation Rules 2011 defines the term ‘continuous supply of service’ as any service which is provided, or to be provided continuously under a contract, for a period exceeding 3 months, or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition.

The following services have been notified as ‘continuous supply of services’ in terms of clause 2(c) of the Point of Taxation Rules vide Notification No. 28/2011-ST, dated 01.04.2011:
(a) Telecommunication Services – Sec. 65 (105) (zzzx);
(b) Commercial or industrial construction – Sec. 65 (105) (zza);
(c) Construction of residential complex – Sec. 65 (105) (zzzh);
(d) Internet Telecommunications services – Sec. 65 (105) (zzzu);
(e) Works contract service – Sec. 65 (105) (zzzza)

The above said services will constitute ‘continuous supply of service’ irrespective of the period for which they are provided or agreed to be provided. Other services will be considered continuous supply only if they are provided or agreed to be provided continuously for a period exceeding 3 months.

Chartered Accountants are appointed on a contract basis, but their services are not covered by the definition of 'continuous supply of services' even if the appointment is for a full financial year. One of the characteristics of the continuous service is issue of running bills on completion of part of the service. For example, in case of construction activities, the running bills are issued on say completion of a particular phase like piling or foundation completion. In my 30 plus years of experience in the commercial world and dealing with professional Chartered Accountants, I have not come across running bills being issued by CAs since their service is not continuous. Even bills for Internal Audit, the CA issues a bill "Professional Fees in the matter of your Internal audit for the quarter ended 30th June 20xx, / for the period 1st April 20xx to 30th June 20xx".

Even if you term the services rendered by a Chartered Accountant 'Continuous Supply Service', it will legally not be tenable.