Service Tax - Total Confusion
While releasing the FAQ on Service Tax in Mumbai on Friday, the FM said that every effort was being made by his department to impart clarity on issues of taxation so that taxpayers did not face unnecessary problems and make mistakes because of non clarity or lack of information . Glorious ideals, but unfortunately the FM seems to be unaware of the chaotic confusion the Revenue bosses are creating not only for the hapless assessees, but also for the worried officer. Look at a few clarifications given by the Board recently for the exclusive use of the Delhi Commissionerate. And these are very important clarifications.
Given below is a clarification given by Delhi Service Tax Commissionerate;
The services provided by the lawyers in their professional capacity are not subjected to Service Tax
The doubt was raised whether the outsourcing of legal work to an associate by a law firm can be categorized under Business Support Service.
The Board has clarified that the services provided by lawyer in their professional capacity relating to law it are not taxable under the service tax. The clarification of the Board is as follows
"The matter has been examined. The scope of taxable service namely "business support service" has been explained in TRU 's letter F.NO.334/4/2006-tru Dated 28.02.06. As regards services provided by lawyers in their professional capacity relating to law, the Finance Minister has already made the position clear on the floor of Parliament. It is also pertinent to note that the Empowered Committee of State Finance Ministers has included Legal Service in the list of services which are not presently taxed. This has been accepted in principle".
And here is a clarification given by the Board! J&K service
Subject : Clarification regarding applicability of service tax on law firms under the category of "business support service" - regarding.
Please refers to your letter F. No. IV(16)Hqrs/Tech/720/S.T./06 dated 12.03.2007 on the above subject.
2. The mater has been examined in consultation with the Ministry of Law. The opinion of the Law Ministry is as follows,-
"Chapter V of the Finance Act, 1994 extends to the whole of India except the State of J&K. Therefore, services provided within the territorial limits of the State of J&K only are excluded from the purview of the levy of service tax.
3.1 Sub-section (1) of section 68 of the said Act provides that every person providing taxable service to any person shall pay service tax at the rates specified u/s. 66 in such manner and within such period as may be prescribed. It will thus be seen that the incidence of service tax is attracted with reference to the place where the service is provided.
3.2 In the case under consideration, the object of service may be in the State of J &K but the service provider as well person receiving the service are outside the State of J &K. Therefore, provisions of Chapter V are attracted.
4. Appropriate action may accordingly be taken in the matter.
And on J&K service, the Delhi Service Tax Commissioner has another clarification - also allegedly from the Board! - which we had carried earlier!
Service Tax chargeable, if the Service provider and service receiver are both located outside Jammu and Kashmir
The doubt was raised if the services provided by a Delhi based company for conduction of topographical survey work of project area in Jammu and Kashmir is chargeable to Service Tax, if the contract for the construction of the project in the state of J & K was awarded to Mumbai based company.
It was clarified by the Board in consultation of the Ministry of Law that even if the object of service is in the state of J & K but as the service provider and the service receiver are outside the State of J & K, the Service Tax shall be chargeable from the service provider.
Board is perhaps trying to apply the concept of import of service into service in or from J&K - thereby treating Jammu and Kashmir as a foreign country. In the above case, how can the Department demand Service Tax from the Mumbai Company for service done in J&K? Who has jurisdiction to demand that?
And why such important sensitive and sensational clarifications are not available in the public domain or does the Board think that these clarifications are applicable only to Delhi Commissionerate. How will the tax payers know about the Board's great wisdom if it is not made public? And the FM says that every effort is made to impart clarity on issues of taxation. In fact every effort seems to be made to ensure that there is no clarity on any issue.
And the preface to the CBEC's FAQ on Service Tax quotes, "Knowledge will forever govern ignorance; and people who mean to be their own governors, must arm themselves with the power which knowledge gives."
And perhaps ensure that knowledge is not percolated down to the stakeholders.