FICCI approaches PMO for review of service tax for consultants

After writing to Union Minister of Finance on various occasions, Industry body Ficci's National Committee on Infrastructure has taken the matter of service tax collection for consultants right up to the Prime Minister's Office, calling for a review.

"The Ficci Infra Committee on various occasions has written to Union Minister of Finance, but to no avail. Our request to the Prime Minister is the service tax payable by the employer of a consultant should be collected by the government directly from the employer," the panel said in a statement.

Under the current set-up, the consulting community pays service tax on behalf of the employer even before it receives its remuneration.

"In case there is any difficulty in accepting our request for direct payment of service tax by the service receiver, Ficci urges the Prime Minister to restore provision of paying service tax within 30 days of receipt of payment," K K Kapila, Co-Chairperson, Ficci Infra Committee, told PTI.

The consultant is supposed to pay service tax within 30 days of raising an invoice with the employer.

"The employer, which in most cases is a government department, usually responds with a payment after a considerable delay ranging from 3-6 months. In the interim, the consultant who is technically not liable for service tax is expected to make the same within 30 days regardless of whether he has received the payment or not," the statement said.

Also, in the case of payment delay, the consultant is "liable for penalties at 18 per cent for the first six months, 24 per cent for further six months and thereafter, 30 per cent, it said, adding that such a payment is linked to the value of invoice whereas actual payment by the employer to the consultant may be less than the value of the invoice raised.

Ficci went further, saying the current procedure of collecting service tax has also posed cash flow difficulty for consultants as their role is merely that of a collector on behalf of the government.

"We seek intervention of the Prime Minister... to ensure this long-standing 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," the statement said.

(Image credits: indiatimes)