FICCI’s National Committee on Transport Infrastructure has urged the Goods and Service Tax (GST) Council to have a re-look at its GST collection regime for Consulting Community and urged him to put the onus of depositing of Goods and service tax on the Client (Service Receiver) both government and Private sector.

At present as per a pernicious practice the consulting community, (service provider) who is not liable for payment of Service Tax/GST (as being not the Employer OR the Service Receivers), are being coerced into payment of Service Tax on behalf of the Employer, whereas, their role is that of a mere collector of tax on behalf of the Government.

“FICCI Infra Committee on various occasions has written to Union Minister of Finance and now to GST Council that the Service Tax/GST payable by the Employer of consultant should be collected by Government directly from the Employer. At present the Consulting community continues to be made liable for payment of Service Tax on behalf of the Employer, even before the Consultants receive their remuneration from the Employer.” Said Mr K K Kapila, Co-Chairperson, FICCI Infra Committee.

“In case there is any difficulty in accepting our request for direct payment of Service Tax by the Service Receiver, FICCI urges the GST Council to restore provision of paying Service Tax within 30 days after receipt of payment. The procedure currently adopted is that the Consulting community is made liable for payment of Service Tax within 30 days of raising an invoice with the Employer. The Employer who in most cases are Government Departments usually respond with payment after considerable delay ranging from 3 to 6 months. In the interim, the Consultant who is technically not liable for Service Tax is expected to make good the same within 30 days, irrespective of fact, whether he has received the payment or not.”said Mr. Kapila.

“At present in case of delay in payment of Service Tax by the Consultants attracts an interest of @ 15% p.a. where the Service Tax has not been collected. An interest of 24% was attracted in cases where Service Tax had been collected but not deposited with the Central Government. The same Point of Taxation continues in the GST regime also with an interest of 18% for not paying on time irrespective of the fact that payment has been received or not” said Mr Kapila

“Further, such Service Tax payment is linked to the value of invoice, whereas actual payment by the Employer to the Consultant may in fact be less than the value of invoice raised. The above procedure of collecting Service Tax has created immense cash flow difficulties for the Consultants on account of Service Tax, which in fact is not payable by them, as their role is merely that of a collector on behalf of the Government..” Said Mr Kapila.

“FICCI suggest that The system existing prior to Finance Act 2012 i.e Service Tax / GST to be paid by the Service Provider within 30 days of its receipt from the Service Receiver. The Service Receiver may pay Service Tax / GST payable to the Service Provider directly to the Authorities, against the Service Tax /GST account of the Service Provider, just as is done for the Income Tax under TDS Provision.” He added.

The above suggestions will help the Consulting Companies to tide over the problems of payment of Service Tax / GST to the Government and relieve their financial burden. It will also help the Government to collect tax revenues effectively.