FICCI’s National Committee on Infrastructure has urged the Hon’ble Prime Minister Shri Narendra Modi ji to have a re-look at its service tax collection regime for Consulting Community and urged him to put the onus of depositing of service tax on the Client (Service Receiver) both government and Private sector.

Mr K K Kapila, Co-Chairperson,

FICCI Infra Committee

At present as per a pernicious practice the consulting community, (service provider) who is not liable for payment of Service Tax (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 but of no avail. Our request to the Hon’ble Prime Minister is that the Service Tax 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 Hon’ble Prime Minister 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, he is further liable for penalties @ 18% for 1st six months, @ 24% for further six months and thereafter @ 30%. 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.” Added Mr Kapila.

“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. We seek intervention of Hon’ble Prime Minister with the Ministry of Finance to ensure that this longstanding demand of the Consulting community is addressed in the forthcoming Budget. Such a step will be a genuine step in ensuring the Ease of Doing Business in the country.” Said Mr Kapila.

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