Service Tax queries

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Jaya (Querist)
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04 June 2011 Re: Service Tax queries

Legal Consultancy Services was brought in the Service Tax net with effect from 1st September 2009 by inserting Clause No.zzzzm in Section 65 (105) of Finance Act, 1994. The coverage of taxable service was limited to service provided by a business entity to another business entity.

The individuals were outside the purview of the term “Business Entity” even though the term “business entity” is not defined anywhere in the Service Tax Regime. With effect from 1st May 2011, the provision has been amended so as to include the legal services:

i) by a business entity to any person in relation to advice, consultancy or assistance in any branch of law in any manner,

ii) by any person to a business entity in relation to representational services before any Court, Tribunal, etc.

iii) entity by an Arbitral Tribunal to any business.

Therefore, representational services by an individual to individual, and advisory services by an individual to any person are still outside the purview of the Service Tax.

In the above context, the following clarifications are required:

i) In proprietary law firm having paid-associates to assist the proprietor; whether it will be treated as an “individual” or a “business entity”.

ii) A proprietary concern rendering only advisory services to some clients and representational to others; whether the advisory services rendered to business entities by the proprietary concern where the proprietor is assisted by paid-associates shall be liable to collect service tax from its clients or not.

The above clarifications shall be of great help in determining the service tax liability and shall facilitate collection thereof without attracting the liability of interest and penalty.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 June 2011 'Business entity' is defined in section 65(19b) through an insertion by the Finance act,2010.
i) If there is no employer employee relation ship between the proprietor and his/her paid associates, the constitution gets the status of 'association of persons' and accordingly becomes a 'business entity'.
ii) In view of the above, service tax attracts both for advisory and representational services given to business entity clients.

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