taxing legal profession

“TAXING LEGAL SERVICE PUTS AT DISADVANTAGE ”

BY

K.SURESH BABU  ADVOCATE TRICHY

"No government can exist without taxation. This money must necessarily be levied on the people

By this write up I am not mixing up economics and taxation with  emotions. The object of service tax was originally intended to impose tax on small-time service providers like paanwallahs and petty shop owners . These tax burdens, make a common man feel  that earning has become a crime and looting money  is looked upon. The validity of Service tax has been challenged in various courts of India, and various decisions have upheld the legality of the levy.

Service tax is said to be tax of 21st century. This tax made a small beginning in 1994. Its tentacles is being widened every year. Service tax is presently payable @ 12% w.e.f. 18-4-2006 (plus education cess of 2% i.e. total 12.24%) on ‘taxable services’ i.e. those services which are specified in section 65(105) of Finance Act, 1994. Service Tax is administered by the Central Excise Commissionrates working under the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India.

The union Ministry has eyed on the Advocates purses .There are whispers that almost all professional services  be it legal, education, health, sports and even film actors – are among the 44 items that are going to come under the service tax.But the imposition of such a tax  on legal fraternity has  brought about a sharp reaction . What does it mean to you? Obviously, your family doctor will add a service tax to his bill, raising his fees, and so will the lawyers .The  petty shop keeper   may not feel the pinch in paying a few paise as tax on a match box but a litigant or a patient  will be worst affected. Common man  say that the central government plans to compensate the states with this money for the phasing out of the Central Sales Tax and also for granting freebies such as rice, television sets etc to the so called poor mass.

In the usual pre -Budget meetings  the  spokes person of the Ministry of Finance was asked by an industrialist why lawyers have been spared from service tax, the lawyer-turned-Legislator  is said to have remarked: "There is a popular belief that lawyers render no service and said in due course lawyers and doctors would also be brought under the service tax net just as chartered accountants. No matter how one looks at this statement But there are lawyers who provide free legal services to the public, often at a moment's notice, by answering an important question, giving advice, or providing referrals. Some  volunteer their time and talents in  educating the public, and our colleagues, by lecturing and by writing in journals and newspapers. The members of the profession serve on the boards of charities, community service, cultural and other organizations directly serving the public and providing legal advice and services to these organizations without charge. Lawyers donate hundreds of thousands of hours of service to low-income clients every year; and routinely discount their fees to accommodate their clients’ means. Such genuine acts of charity are a viable alternative to the services.

The proposal to bring the lawyers under the service tax net raises the cost of legal services for consumers. A litigant getting legal advice from a lawyer cannot be compared with that of a person who gets tax advice from a chartered accountant. Tax advises are sought to evade taxes. One law for wolf and ox is oppression. Auditors  might think that lawyers are cats pajamas entirely selfish and self seeking . This issue triggers an issue of fundamental right and to that extent there could still be some scope for the High court to intervene U/A  226 of the constitution..

Here are some tips to help those who are uninformed to comply their service tax obligations:

·        register before the jurisdictional central excise officer

·         Once you are done with your registration process and are regularly depositing your tax, the time comes to file returns. All service tax assessees are required to file a half-yearly return in Form ST-3 or ST-3A, to the superintendent of Central Excise, dealing with service tax work. The return is to be filed within 25 days from the last day of the half-year it relates to and should be accompanied by copies of all deposit slips issued in the relevant period. Thus, the returns for half year ending September 30 and March 31 are required to be filed by October 25 and April 25, respectively.

·        While no specific accounts are required to be maintained, it would be advisable to keep proper records of all payments by the clients.

·          There are penalties for not paying the tax on time. A charge of 1.25% per month is levied on the amount due. As for failure to file returns, a penalty of between Rs 100 and Rs 200 per week is charged

The issue is so complex, and many are pretty perplexed at this point, so it is not wise to expect any kind of authoritative assessment at this juncture .Any how the  damage that is likely to be  caused by this tax may be slower to emerge and less perceptible than its apparent benefits, but in magnitude it is many times greater. For justice, as well as for the greatest good for the greatest number, the proposed levy on lawyers ought to be rejected because they target poor  litigants

K.Suresh Babu

Advocate

28,Williams Road

cantonment,Trichy