Service Tax On Chartered Accountants

SERIVCE TAX ONCHARTERED ACCOUNTANTS SERVICE

- BY CA SUDHIR HALAKHANDI

The Institute of Chartered Accountants of India, established by the Act of parliament, is besides imparting education of Accountancy, controlling the profession of accountancy in our country. After passing the required examination conducted by ICAI coupled with completing the required IT (Computer) and Articleship training one can get the degree of Chartered Accountant and a chartered accountant can thereafter apply for certificate of Practice from the ICAI. There may be partnership firms of the chartered accountants engaged in this profession, which are also covered in the definition of the Practising Chartered accountant.

2. WHAT IS TAXABLE SERVICE

Section 65(105) (s):-

(Prior to 16.6.2005)

Taxable service means any service provided to a client, by a practising Chartered Accountant in his professional capacity, in any manner.

Section 65(105) (s):-

(From 16.6.2005)

Taxable service means any service provided or to be provided to a client, by a practising chartered accountant in his professional capacity, in any manner;

The services provided or to be provided by a chartered accountant, in his professional capacity are only taxable. Let us see what type of services a practising chartered accountant can provide in this professional capacity: -

Generally the Chartered Accountants render the following services in their professional capacity: -

1.Accounting and Auditing Services;

2.Certification Services

3.Taxation Consultancy including income tax, Service tax and VAT

Consultancy.

4.Consultancy in the matters related to Corporate Governance.

5.Management Consultancy.

6.Consultancy related to Financial Planning and project financing.

3.DATE OF TAXABILITY

The tax on this service was imposed in 1998 by Notification No. 53/98-ST dated 7^th October 1998 and the effective date of taxability of this service is 16.10.1998.

4.RATE OF TAX

PERIOD	RATE OF TAX
16-10-1998 to 13-05-2003	5%
14-05-2003 to 9-09-2004	8%
10-09-2004 to 17-04-2006	10%
17-04-2006 onwards	12%
Education Cess	2+1=3% on service Tax

5. PERSON LIABLE TO TAX

Generally the Service tax is payable by the Service provider as per section 68 of the Finance Act-1994 though exceptionally this responsibility is given to the persons other than the service provider as per the provisions of Section 68(2) by issuing a Notification in this respect.

No such Notification has been issued under section 68(2) with respect to this service hence the person liable to pay service tax is service provider.

6. EXEMPTION FROM SERVICE TAX

(i). REPRESENTATIVE SERVICES

And now on 13-07-2006 a new Exemption Notification exempting the statutory representative services of the Chartered Accountants in any proceedings under any law which has been initiated by issuing a notice has been made exempt and this exemption notification is as under: -

Government of India

Ministry of Finance

(Department of Revenue)

***

New Delhi dated the 13^th July, 2006.

22 Asadha, 1928 (Saka)

Notification
No. 25 / 2006-Service Tax

G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services falling under sub-clauses (s), (t) and (u) of clause (105) of section 65 of the Finance Act, provided or to be provided by a practicing chartered accountant, a practicing cost accountant and a practicing company secretary respectively, in his professional capacity, to a client, relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice, from the whole of service tax leviable thereon under section 66 of the said Finance Act.

(R. Sriram)

Deputy Secretary to the Government of India

[F. No. 356/37/2006-TRU]

This notification is followed by a press release in which it is clearly stated that this exemption is being provided on the ground that the other professionals also provide the similar services also and the exemption will be applicable till all these professionals including advocates are covered by the service tax.

Let us see the exact press release in this respect: -

PRESS NOTE

Central Government issued Notification No.25/2006-Service Tax dated 13.7.2006 exempting from levy of service tax services provided by a practicing Chartered Accountant/Cost Accountant/Company Secretary, in his professional capacity, to a client, relating to representing the client before any statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice.

Service tax is leviable on all the services provided by a practicing Chartered Accountant/Cost Accountant/Company Secretary to a client with effect from 1.3.2006.

Representations have been received from the Institute of Chartered Accountants of India, the Institute of Cost and Works Accountants of India and the Association of Company Secretaries of India requesting the Government to consider exemption from levy of service tax on certain specified services provided by them which are also provided by other professionals and those other professionals providing similar services are not taxable. It has been stated that such an exemption is required till such time other professionals providing similar services are also taxed.

Government has considered the representations.Taking into account the views expressed by the Institutes and the Association and the other material facts, Government has exempted from levy of service tax only representational services provided to a client by a practicing Chartered Accountant/Cost Accountant/Company Secretary to appear before a statutory authority in the course of proceedings initiated under any law for the time being in force, by way of issue of notice.

For details the above-mentioned notification may be referred to.

Now in the similar situation the services provided by the Chartered accountants in the field of taxation, other professionals like advocates, Tax practitioners and now the New breed of TRPs are also providing these services but only the representative services are exempted.

(ii). EXEMPTION TO SMALL SERVICE PROVIDERS

The service providers whose aggregate value of service provided during the immediately preceding year does not exceed Rs.10 Lakhs are exempt from service tax in current year up to the receipt of Rs. 10 lakhs. This exemption is not available where the liability of payment of service tax is of persons other service provider. Here in this particular service the liability of payment of service tax is of Service provider hence the exemption is available but this exemption will not be available if the service provider is using the brand name of another person. This exemption is also subject to some conditions on allowability of Cenvat credit during the period of exemption Notification No. 6/2005- Service Tax, dated 1.3.2005 applicable from 1^st. April 2005.

(iii). GENERAL EXEMPTION

1. Services provided to United Nations States or International Organisations are totally exempt from service tax.

2. Service provided to developer or units of SEZ are exempt from service tax, subject to certain conditions, are exempt from service tax.