Service Tax on Senior Advocates - Confusing Rollback
FROM 1.4.2016, Senior Advocates became liable to pay Service Tax under forward charge. Concerned senior advocates have got stay from some High Courts and the CBEC was planning to take all the cases to the Supreme Court.
In the meanwhile, it was rumoured that some senior advocates convinced their learned brother senior advocate Arun Jaitley to roll back this adventurous tax and it seems he agreed.
I asked a senior officer in the Board whether there was any proposal to withdraw this tax. He told me that this brilliant idea came from the FM himself and there was no possibility of any rollback.
Rollback they did, in a most confusing way - that only the Government can do. Even the learned senior advocates will find it difficult to understand what exactly the Government has done and what exactly the position now is.
The Government issued three notifications on 6th June 2016 relating to the subject:
1. Notification No. , Dated: June 6, 2016: Notification No. 25/2012-Service Tax, dated 20.6.2012 is amended to exempt services provided by a Senior Advocate by way of legal services to any person other than a business entity; or a business entity with a turnover up to rupees ten lakh in the preceding financial year.
2. Notification No. , Dated: June 6, 2016: The Service Tax Rules are amended to stipulate reverse charge mechanism for services provided by senior advocates, that is tax is to be paid by the recipient of service and if the senior advocate is engaged by another lawyer, the Service Tax is to be paid by the litigant.
3. Notification No. , Dated: June 6, 2016: Notification No. 30/2012-Service Tax, dated 20.6.2012 is amended to stipulate 100% payment of tax by the recipient of the service provided by senior advocates.
So, the position briefly is:
1. Services provided by senior advocate to a business entity with a turnover of more than Rs. Ten lakhs, are taxable.
2. The whole of the tax is to be paid by the client.
And for this, they have now issued three notifications and enabled waste of hundreds of tons of paper and precious time of several senior advocates and High Courts - all for a mission that would not have got them even a few thousands of rupees.
Disease of doing business in full swing!