Enabling Practice in Service Tax- Part -I
Madhukar N Hiregange FCA
The practice in service tax is one area which would offer immense opportunities for the starter as well as multi partner firms. One of the main reasons for this is service tax as a subject is still in a development stage and it would take assessee in
As in any tax various questions require to be answered while practicing in service tax. The common ones in the experience of the paper writer are: [anyone interested in practice of service tax would require to know]: .
ü Where the levy is applicable?
ü On Whom the levy is applicable?
ü On which event is the levy applicable?
ü What is the value for payment?
ü What set – off would be available?
ü Basic Procedure for registration
ü Procedure for payment of Service Tax
ü Procedure for filing returns
ü Services which a CA can provide
ü Practioner’s Aids
[ these concepts would be explained in part –II of this article]
Opportunities in Service Tax
In the present circumstances since the service providers do not wish to deal with the government officers there is a space as an intermediary which role over a period of time may disappear with information technology allowing for on line registration, filing, answering etc.
The main areas or opportunity as per the paper presenter are indicated hereunder:
- Strategic Advise: Large projects by Government or Industrial / Service Groups have large outlays wherein the indirect taxes involved of central excise duty, customs , VAT/ CST and Service Tax could be quite substantial.[ maybe even 20% + of total cost] Optimising the tax costs in such area would be value additive. The route to follow could also determine the future tax costs of the transactions. The study of the alternative options and marrying the various taxes could also result in a very competitive model. Normally for this expert knowledge maybe necessary along with multi tax appreciation.
- Initial Registration: *****The registration services are one the best initial services to be offered as the client at that point of time is clueless on the formalities. Normally registration is complete within a couple of days as deemed registration concept exists. Past years transactions may have to be reviewed to ensure that no liability. At this point whether liable, under which category, whether requiring centralised registration, drafting of covering letter explaining the activities, examination of customer profile can be done, is it preferable to register and claim the credit as there is a possibility of the refund/ rebate. Similar to the incorporation of a company, clients who come for registration if satisfied with our service would tend to stick with us for other services. At this stage if the matter is not clear then the option to go for payment under protest is to be instituted.
- Initial Disclosures to department: ***The books of account, procedures to be followed, copies of documents wished to be disclosed can all be provided. Intimation of the type of services provided along with copies of important contracts.
- Initial Procedural Hand Holding: ***How to maintain the accounts, how to raise the bills, draft quotation, orders, agreements, filing of returns, payment of service tax, calculation of interest etc. Many service providers who are mainly technical people do not understand any tax and may require someone to initiate them into the requirement of the records to ensure compliance. A Standard Operating procedure for the organization would add value to them due to the high rate of attrition today. Implementing controls in this area may also be an activity which is required.
- Monthly/ Quarterly payment of Service Tax:*** Calculation, availment of credit, net payment, liability as receiver, export of services confirmation: This maybe akin to the book writing work which Cas have been doing in the past. This type of service is something, which is ongoing for the life of the tax. However the auditor may have to keep himself abreast of the latest changes to ensure that the client is not surprised at a later date. The major contracts can also be examined so that client can recover the taxes from the customer if applicable. Many MNCs look at this type of an activity keenly and would like to have a certainty about the taxes either as a cost or an item which is recoverable. This is also the ideal area to build up the critical mass to be able to provide high levels of service in the least time.
- Six Monthly Return Verification/ Filing:**** Verifying the collated information and filing of information required where the client keeps all the records and has accounted for himself. A limited audit of the records and returns. Many clients do look at this type of assistance due to the uncertainty that exists in this law. Generally this can be quite value additive especially in availing the Cenvat credits optimally.
- Service Tax Review / Quarterly Audit: **Many service providers/ manufacturers find a one time review of the compliance along with the examination of availing all the benefits available providing them with value as well as comfort. Further at periodical intervals to ensure all the compliances in place as well as the credits availed properly is also useful for a growing company or one where the ST payments are in lakhs. This is done subsequent to the filing of the returns. Some clients like to ensure that the internal audit includes the tax compliance. This service can also be provided to other Cas where they have taken up internal audits but have no expertise in Service Tax.
- Opinions/ Clarifications ( Including Examination of Contracts/ activity): *Main area of consultancy to examine the applicability of Service Tax, options for valuation, exemption available, advise on structuring of contract/ PO. After the first few years this can result in a continuous stream. The fact that the industry is doing well or doing badly may not affect this area. Availing of the proper opinion and understanding the correct position aids managements decision making and can also lead to focus on areas where tax is optimal.
- Effect of budget/ recent changes on activity: ***Important area as to become aware the client may take some time. A week back the notification asking SEZ units/ Developers to claim refund is an example. Service providers to SEZ now require to charge the service tax and they have to go for a refund.[ recommended to be free service to be intimated to all clients]
- Past errors rectification: **Compliance with least difficulty considering the various exemptions, date of applicability, availment of credits, voluntary to avoid penalties.
- Department IAP or CAG audit Assistance:** These audits are dreaded by the tax payer who normally has a very perfunctory knowledge of the provisions and rules. Therefore a knowledgeable professional who can interface with the departmental officer could be of great value.
- Departmental letter reply: **Now a days the audit wing of the CAG as well as the Preventive wing of the Department are learning at the cost of the assessee. Almost every audit has a 6-20 objections. Normally if a reasonable reply is provided to the audits with extracts of the law/ circulars or Tribunal Judgments, majority of the points would be dropped. This could be relating to many aspects of the tax and may apply to taxable service provider as well as others. It can happen that queries are asked from other states as well.
- Show Cause Notice Reply: The best learning ( as also the earnings) generally come to the professional when he/ she handles the SCN reply as the result would also determine where he is perceived to be. If he/ she wins a majority of cases and wins all that he promises then he has no looking back. At this point the professional should let the client know the chances especially if the same are not too good in writing / mail so that there is no scope for disappointment.
- Representation before adjudicating authority: This normally follows the SCN reply. All the important evidences and defenses should be put forward at this point as it is possible to get all the details necessary. All issues relating to fact should be confirmed at this point. However sometimes the Officers simply confirm the SCN, a risk which should be communicated to the client.
- Reply / Representation at appellate forums: As in reply and representation appeal before first the Commissioner Appeals and then the Tribunal is to be made. At the Commissioner Appeals stage the chances are slightly better as the Officer is not the one who has issued the notice. At Tribunal stage the order is almost final in the sense that lesser need to go to the High Court or Supreme Court. Where large stakes are involved the assistance of an experienced pleader whether a CA or advocate maybe sought.
- Assistance to advocate at High Court/ Supreme Court: As the professionals cannot represent they can play the role of advising the advocates. On public platforms advocates have been known to appreciate the meticulous working of the Cas.
- Other Area: These could be in training/ teaching, writing articles, assisting in drafting the notification or authoring. Many new areas are emerging based on the needs of the tax payers.
Note - * = Degree to which starter can practice. 0* means wait till some knowledge of subject exists. 1* means can start but should get confirmation, 2** means can try out but confirm with books etc *** means go ahead – read each time before completion. 4**** means take the opportunity to start off.
However, before making his/her selection, the professional should remember that the subject of service tax is quite complex with quite a few pitfalls and he/she should first of all have adequate exposure to this area plus proper training without which the desired results may not be available. The knowledge of central excise can provide the edge.
The formulae for success for the practitioner is that he should provided quality, at the price ( where the value derived is higher than the fees), with grace and affection ( with a smile) and there should be an element of service in the practice. In the face of the present slow down this approach is a sure shot for success.
Other Requirement for Practice
In the experience of the paper writer the adoption of high ethical values is the largest adder of value to the professional. These could be client focus, knowledge of the subject, integrity ( do not make the client wrong and keep your word), sincerity, value addition among several others.
ICAI – Service Tax Online
Attend as many study circles/ seminars on subject as possible.
Buy / subscribe for the following:_
- Central Excise Manual – R.K.Jain – Centax Publications
- Central Excise Tariff Act – R.K.Jain – Centax Publications
- Service Tax Reporter – Centax Publication
- Ex Cus CD ( updated quarterly) – Centax Publication
- Law Crux – ( additional laws covered but not stable)
- Taxindiaonline.com, taxmanagementindia.com
- Web site of ICAI pdicai
- Number of Yahoo groups ( Pune, Meerut,CA / CWA etc)
- Sites of leaders in area ( articles/ insights)
- Service Tax Commentary by Taxmann Publications, Bharat etc.
- Central Excise Made Simple- Bharat, Centax etc.
The paper writer hopes that more and more professionals start practicing in this area of indirect taxation enabling development of the area. The vision is a simple, clear and transparent law and fair administration. Wishing you an empowering and rewarding practice.