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Today, business does not survive without an efficient and effective team of professionals. CAs, cost accountants, advocates, senior legal counsels, company secretaries, tax experts and consultants are the most sought after species for any large organisation or for that matter even a small individual business entity.


Service tax on CAs, cost accountants and company secretaries was levied w.e.f. 16th October 1998. As per the statutory definition for CAs, cost accountants and company secretaries; according to section 65(105)(s)/(t)/(u), taxable service means any service provided or to be provided to any person by a practising chartered accountant / cost accountant / company secretary in his professional capacity, in any manner.


Thus, the services rendered by CA/CS/CWA should be in his professional capacity. Therefore, if the services are rendered in the nature of employment, the same shall not be liable for service tax. Further, many professionals also provide services as lecturers to colleges. Such services are not rendered by them in their professional capacity and hence cannot be considered as taxable under practicing CA/CS/CWA services.


But as the trend goes, none of the services under the regime of service tax is without controversy or ambiguity.


The controversial aspect of service tax on professionals is that the government has handed out step-motherly treatment to CA/CS/CWA in comparison to lawyers or advocates. Legal services were brought under the ambit of service tax much later than the other professional services. If we look through definition of legal consultancy service, according to 65(105) (zzzzm) of Finance Act 1994, "Taxable Service means any service provided or to be provided to a business entity by any other business entity in relation to advice, consultancy or technical assistance in any branch of law in any manner." Further, explanation is provided whereby "business entity" includes an association of persons, body of individuals, company or firm, but does not include an individual.


Thus, services provided by an individual advocate either to an individual or even to a business entity would be outside the scope of the taxable service. Similarly, the services provided by a corporate legal firm to an individual would also be outside the purview of taxable service. So, a common man who is an individual will have to spend less money if he approaches a person other than a practicing CA/CS/CWA because they will be charging him service tax whereas other professionals are not required to charge service tax.


Further, in legal consultancy service case, both, the service provider as well as service recipient is required to be business entities. There will be many cases wherein there will not be any liability towards payment of service tax. Thus, if an individual CA/CS/CWA crosses meager threshold limit of Rs10 lakh, he will fall under service tax, whereas any other professional like lawyer or advocate would not be liable in the similar situation.


Effective appearance before the statutory authorities is an indispensable activity in case of litigations. In case of "appearance fees" there is no level playing field for CA/CS/CWA vis--vis advocates or lawyers or other professionals. Vide Notification No. 25/2006-S.T., dated 13.07.2006 exemption is granted in respect of services provided or to be provided by a practicing CA/CS/CWA 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.





Category Service Tax, Other Articles by - MONISH BHALLA 



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