Bar Council of India is a club liable to pay Service Tax? – No Charity!says, Board.
And so is FICCI! The Board clarification says that even if an organisation is exempted under IT Act as a charitable institution, it need not automatically go out of the purview of Service Tax.
As per the Act,
(25a) “club or association” means any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include—
(i) any body established or constituted by or under any law for the time being in force; or
(ii) any person or body of persons engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry; or
(iii) any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature; or
(iv) any person or body of persons associated with press or media;
Now are the activities of Bar Council of India or FICCI charitable in nature? Income Tax Department would say, “yes”, but not Service Tax.
The recent clarification given by the Commissioner, Service Tax in the Board says,
++Exemption under the Income Tax Act on the ground of being a public charitable institution is of no consequence to levy of service tax. Levy of service tax is entirely governed by the provisions contained in the Finance Act, 1994 and the rules made there under.
++ The definition of “charity” and “charitable” as defined in Black’s Law Dictionary may be kept in mind. “Charity” is defined as “aid given to the poor, the suffering or the general community for religious, educational, economic, public safety, or medical purposes”, and “charitable” as “dedicated to a general public purpose, usually for the benefit of needy people who cannot pay for the benefits received”.
++The officer concerned should examine the matter on a case-by-case basis, and the decision should be made after taking into account all material facts and statutory provisions.
He does not clarify whether FICCI is liable to pay Service Tax. He wants the officers to take a decision after taking into account all material facts. Now what will happen if the officer in Bangalore decides that FKCCI is not liable to pay Service Tax and the officer in Hyderabad decides that FAPCCI is liable to pay tax? Why can’t the Board give a clear clarification this way or that?
Even Black’s Law Dictionary, which the Board quotes, defines charitable as “dedicated to a general public purpose, usually for the benefit of needy people who cannot pay for the benefits received”. It is primarily “dedicated to a general public purpose” and is “usually for the benefit of needy” – It need not always be for the benefit of the needy. In unusual cases it can be for the benefit of the greedy - like advocates for instance.
The heading of this piece is not really correct. Bar Council of India is not liable to Service Tax with or without charity, as it would be excluded in the first clause - any body established or constituted by or under any law for the time being in force, but Bar Associations and Advocates’ Associations will be liable.
And that still makes FICCI and CII liable to tax. Or why can’t they define charity in the Service Tax statute or say that it has the same meaning as in the Income Tax Act? In the name of clubs, did the government really want to tax trade associations and flat welfare associations?
Board Circular No. Dated 19thSeptember, 2006