Saturday, 8 June 2013

This is an Inconsistent provision

Discriminative levy of service tax (ST) on Practising Chartered Accountants

This article deals with the discriminative levy of service tax (ST) on Practising Chartered Accountants (CA) vis-à-vis the Practising advocates.

India – a country which places a due emphasis on the concept of equality & which is one of the fundamental principle as laid down in the glorious preamble of our constitution, has certainly failed in adhering to its own created laws further ensuing ambiguity in the system.

Look what I’ve got you this time – “The Baffling Game of LAW”... Read on & get amazed……

SYNOPSIS- All services provided by a CA are subject to levy of ST. There are certain similar services rendered by advocates, which are not subject to any levy of ST. Levy of ST on services provided by CA has always been an intriguing matter. Take a look.

Initially all the services provided by a Practising Chartered Accountant in his professional capacity in any manner were taxable.

But, we got some consolation, whereby all services provided by CA were granted exemption except two services viz. Accounting and Auditing., the benefits were withdrawn & all services of a practicing CA were brought to the tax net again.

On the basis of strong representations, the Government exhibited some leniency, & exemption was granted to services 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.

But the said benefit was also taken away with the introduction of negative list. So, a CA is now in the same position as he was in the beginning of the levy in 1998.

Authorized representative (AR)-
Following rules & acts allows both the CA & the Advocate to act as an AR for their clients in the legal proceedings:
  • ·         Wealth Tax Act, 195
  • ·         Income taxAct, 1961
  • ·         Gift Tax Act, 1958 (now kept under suspension)
  • ·         Central Excise (Appeals)Appeal Rules, 2001
  • ·         Central Excise Act, 1944
  • ·         Finance Act 1994,
  • ·         Customs (Appeals) appeals Rules, 1982
  • ·         Customs Act, 1962
  • ·         Company Law Board Regulations, 1991
  • ·         Foreign Exchange Management Act, 1999


This shows that both CAs and advocates are treated at par and as equals so far as their entitlement and qualification to act as an AR is concerned.

Renewed status from 01-07-2012
From 1-7-20121-7-12 onwards, all services are taxable except those specified in the negative list under Section 66D of the Finance Act,1994 or in the Mega exemption notification
Effect on CAs-
Tax Audit Firm
Chartered Accounting Firm
Chartered Accountants
The services carried out by CAs/advocates to a client are regarded as an activity for consideration.
No exemption has been granted to CAs neither in the “Negative list” nor in the “Mega Exemption notification”.

Exemption to practicing Advocate OMG!!!
The notification No. 25/2012–ST, grants exemption in respect of services provided by an advocate or a partnership firm of advocates by way of legal services to
1. an advocate or partnership firm of advocates providing legal services;
2. any person other than a business entity; or
3. a business entity with a turnover up to R10 lakh in the preceding financial year.
There is no as such ground which has till now granted any justification with regard to this discrimination.

Full reverse charge mechanism:

Notification states that service tax liability connected with the legal services rendered by an advocate/Firm of advocates is to be discharged by the client receiving the services.

How’re you feeling now haan?  Here also CAs have been betrayed by law ruefully.

A peep into the ARTICLE 14 of our Constitution:
It states- Equality before law: “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.”
Equal protection means the right to equal treatment under similar circumstances.
Article 14 only prohibits unequal treatment of persons similarly situated and (discrimination in levy of tax with the same level placed CAs amounts to prohibition of law)

And my clients who are advocates proudly say!!!!!
“ Saab! Hum Service kahaan dete hai….. hum to desh seva karte hai !!!!!
Yeh kahaan ki insaafi ….
CA kare to service aur Advocate kare toh  Desh Seva!!!!  Wah bai Wah !!!!


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