Service tax norms taking toll on engineering consulting firms: Gadkari to Jaitley

New Delhi: Ahead of Budget, Union Minister Nitin Gadkari has asked Finance Minister Arun Jaitley to have a relook at service tax compliance requirements of consulting engineering companies (CECs). “The government is fast-tracking the development of infrastructure projects and in this endeavour is trying to remove bottlenecks… [caption id=“attachment_2032293” align=“alignleft” width=“380”]  Union Transport Minister Nitin Gadkari. PTI[/caption] “One of the impediments which is hurting the CECs …levy of service tax for which the compliance responsibility has been shifted from the service receiver (government or the private sector) to the service provider (CECs),” Road Transport and Highways Minister Gadkari said in a letter to Jaitley. Noting that “this has imposed drastic financial liability on CECs to deposit the service tax within 30 days of raising the bill”, Gadkari asked for restoration the earlier point of taxation including service tax to be paid within a specified time after receipt of payment from service receiver. He has also requested Jaitley to alternatively change CECs service tax via Tax Deduction at Source (TDS) mode, which means that when a service receiver makes payment to the consultants, he simultaneously deposits the service tax amount with the authorities against the service tax account of the consultants. As against the earlier provisions of paying service tax within 30 days of receipt of payment, the consultants are have to pay service tax within 30 days of issuance of invoice itself, even if the invoices remain unpaid for months, the letter said. Delayed payment of service tax further attracts huge interest at the rate of 18 percent and for delayed payment beyond six months, interest rate increases to 24 percent and beyond 12 months to 30 percent, the letter said. “This has practically crippled the CEC’s who hardly have any capital base and have to borrow money to pay service tax,” Gadkari said. PTI