PRACTISING CHARTERED ACCOUNTANT, PRACTISING COST ACCOUNTANT & PRACTISING COMPANY SECRETARY

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST dt.07.10.1998.

Definition:

1. “Practising Chartered Accountant” is a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949 and includes any concern engaged in rendering services in the field of chartered accountancy.
(Section 65(52) of Finance Act, 1994 as amended)

2. “Practising Cost Accountant” is a person, who is a member of the Institute of Cost and Works Accountants of India and is holding a certificate of practice granted under the provisions of the Cost and Works Accountant Act, 1959 and includes any concern engaged in rendering services in the field of cost accountancy.
(Section 65(53) of Finance Act, 1994 as amended)

2 “Practising Company Secretary" is a person who is a member of the Institute of Company Secretaries of India and is holding a certificate of practice granted under the provisions of the Company Secretaries Act, 1980 and includes any concern engaged in rendering services in the field of company secretary ship.
(Section 65(54) of Finance Act, 1994 as amended)

Taxable event and scope of service:

1 Taxable service means any service provided to a client, by a practising chartered accountant in his professional capacity, in any manner. (Section 65(72) (s) of Finance Act, 1994 as amended)

2 Taxable service means any service provided to a client, by a practising cost accountant in his professional capacity, in any manner. (Section 65(72) (t) of Finance Act, 1994 as amended)

3 Taxable service means any service provided to a client, by a practising company secretary in his professional capacity, in any manner. (Section 65(72) (u) of Finance Act, 1994 as amended)

4 The following services, which are provided by practising Chartered Accountant, a practising Cost Accountant or Company Secretaries in their professional capacity to a client and are rendered by them either exclusively or are common to their profession, are liable for payment of Service Tax. In case of service provided by the practising Chartered Accountant, a practising cost accountant or company secretaries, the taxable services are,

(i) accounting and auditing; or

(ii) cost accounting and cost auditing; or

(iii) secretarial auditing; or

(iv) verification of declarations in prescribed forms of compliance's for obtaining a Certificate of commencement of business or commencement of other business under section 149 of the companies Act, 1956 ( 1 of 1956); or

(v) signing of the annual return of listed companies under section 161 of the companies act, 1956( 1 of 1956) ; or

(vi) certification that requirement of Schedule XIII to the Companies Act, 1956 (1of 1956) have been complied with as regards statutory guidelines for appointment of managerial personnel and payment of managerial remuneration to them without the approval of the Central Government under Section 269 and Schedule XIII of the Companies Act, 1956( 1 of 1956) ; or

(vii) Certification of documents to be filed by Companies with the registrar of Companies under Companies Act, 1956(1 of 1956); or

(viii) Certification in Form 1 that the whole of the amount remaining unpaid or unclaimed for a period of three years from the date of transfer to the special account under subsection (1) and sub-section (2) of section 205A of the Companies Act, 1956 (1 of 1956) has been transferred to the General Revenue Account of the Central Government under the Companies unpaid Dividend (Transfer to General revenue Account of the Central Government) rules, 1978; or

(ix) Certification of documents under the Exports and Imports Policy (1997-2002) of the Government of India; or

(x) Certification for exchange control purposes which a practising chartered accountant can issue as documentary evidence in support of certain applications under the Foreign Exchange Regulation Act, 1973 (46 of 1973); or

(xi) Certification in respect of valuation of instrument or assets as per rule 8A (7) of the wealth tax rules, 1957 (Notification No.59/98-ST dt.16.10.1998)

Thus, in case any of the above mentioned services are rendered to a client by either a practising chartered accountant or a practising company secretary or a practising cost accountant, the same would attract Service Tax. For example, Certification services for exchange control purposes provided by a practising chartered accountant or a practising company secretary or a practising cost accountant under the Foreign Exchange Regulation Act, 1973 to a client shall attract Service Tax. Similarly in a case where services of accounting or auditing or costing or certification related thereto are provided by a practicing chartered accountant or a practising company secretary or a practising cost accountant, the same shall attract Service Tax. Another example are the cases where a practising chartered accountant or a practising company secretary or a practising cost accountant provides services to a client of appearing before the Foreign Exchange Appellate tribunal or the Income Tax Appellate Tribunal as his authorized representative. He shall be exempt from paying Service Tax on such services to the client, as the service in question is not covered in the list of services mentioned above.
(Ministry’s F. No. 11/3/98-TRU dt.20.10.1998)

Value of Taxable Service:

In the case of practising Chartered Accountant, Practising Cost Accountant and Practising Company Secretary– “Value of taxable service shall be the gross amount charged by the service provider for such services rendered by him.” (Section 67 of Finance Act, 1994 as amended)

Exemption and Exclusion:

1. The services other than those mentioned in Sr.No.4 of Taxable events and scope of services above are exempted from payment of Service Tax. (Authority: Notification no. 59/98 ST dt.16.10.1998).

Case Law:

Constitutional validity of Service Tax leviable on the services provided by Practising Chartered Accountant was challenged by All India Federation of Tax Practioner’s & Others before the Hon’ble Mumbai High Court in Writ Petition No.142/99 and the said Hon’ble Court has dismissed the petition vide order dtd.22-2-2001. The main ground held by the Court was that such a levy is, in pith and substance, a levy on the profession, and as such falls within the legislative competence of the States only. It was also contended that the distinction made between professionally qualified Chartered Accountant and other tax practitioners who render similar services, and bringing the former alone into the tax net is discriminatory. The High Courts rejected both the contentions, and held that the very fact that Parliament has levied tax on service rendered by the professionals with reference to gross receipts received by them for the services makes it clear that the levy is not a tax on professions, since profession tax levied by the States is a tax levied on a person because he is carrying on a profession, irrespective of his income. The classification adopted as between the qualified professionals and others was also held to be reasonable and not arbitrary, since the nature of services provided by a qualified Chartered Accountant is bound to be qualitatively higher than the services rendered by non qualified person. The Court also held that the apprehension that the professionals would be required to pay service tax even if their clients did not pay the fees was misplaced, since Section 68 of the Act provides the requisite protection to cater to such cases.
 

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