The Hindu Business Line : Service tax on CAs' services

Is service tax is attracted for a practicing CA on all audits, or only on those done under the provisions of a statute?Is service tax Notification No.59/98 dated October 16, 1998 applies only to audits done under a statute, or generally to all audits, whether or not done under a statute?

Service tax had been imposed on practising CAs' services with effect from October 16, October, 1998 vide Notification No. 53/98-ST, dated October 7,1998. The gross amount charged by a practicing CA from the client, in professional capacity is chargeable to service tax.

Taxable service would include rendering of professional services in the professional capacity in the field of auditing and accountancy. CA, practising in their individual names and also as partners of firms shall be liable for service tax in respect of only notified services provided as practicing accountants. In case of firm of CAs, the firm is the service provider, and not its partners in their individual capacity. Services provided by chartered accountants normally include: accounting services, auditing, taxation, corporate matters/consultancy, management consultancy,

project finance and consultancy, other consultancy, certification work, any other service in professional capacity, but service tax was leviable on accounting and auditing auditing services . (Refer Notification No. 59/98-ST, dated October 16, 1998).

It is only the services offered by the CAs in their `professional capacity' which are made taxable and the services other than specified services provided by the practicing chartered accountants are exempt from tax as a practicing chartered accountant. However, if such service falls under any other taxable category, it would be subjected to service tax.

Vide Notification No. 15/2002-ST, dated August 1,2002, it had been clarified that in case a CA provides other taxable services, service tax will have to be paid on such taxable service with effect from August 16, 2002. These services could be management consultancy or manpower recruitment services or any other service.

In view of the aforesaid, it can be clarified that:

Service tax shall be levied on services of CAs in relation to all audits whether carried out under a statute or otherwise.

Notification No. 59/1998-ST dated Octoerb 16, 1998 applies to all sort of audits and not only those provided under any statute.

It will be advisable to refer to Notification No. 15/2002-ST dated August 1, 2002 which amended Notification No. 59/1998 besides referring to Notifications issued in relation to business auxiliary services, manpower recruitment and supply services, banking and financial services and management consultancy services.

However, with respect to March 1, 2006, Notification No. 59/98 has been rescinded and therefore, all services provided by a practicing Chartered Accountant or Company Secretary or Cost Accountant in their professional capacity shall be taxable services.

(Send in your queries on service tax, excise and Customs to MentorAtYourService@gmail.com. Blog at: http://MentorQA.blogspot.com)

Sanjiv Agarwal

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