Other Essays/Educate Your Client term paper 41287

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WHAT IS THIS BOOK ALL ABOUT? WHY SHOULD YOU BUY IT?

In the famous Satyajit Ray movie, Jana Aranya, a character in the film says, that a communication received from your Assessing Officer which could be a notice under a particular Law such as a fiscal law like the Income Tax Act, is a love letter that gets you right in the heart. Why? Like love letters as are generally known any one reading a communication of this sort from an Assessing Officer is likely to experience an acceleration in the heart rate, but the only thing tender in this notice is the paper in which it is written. Well, knowing the law about income tax could make you perspicacious of the possible realistic consequences and such enlightenment could regulate the adrenalin pumped into the cardio vascular system should you be the unlucky one to get this kind of a notice from your Assessing officer. If you know the law and are careful enough to comply with it then there aren�t likely to be occasions, where your assessing officer would address such a document to you. A recent high profile recipient of such a communication (fan mail) was the happily married Big B. As the name of the book �Educate Your Client� suggests it is likely that the person reading it is in all probability going to get a copy from his consultant or his lawyer or his chartered accountant. However, you could be one of those people who may have by-passed his CA and bought the book directly from the book shop which may be a good thing to do. Anyway, decide that after reading the whole book.

If you are a client, of course, the first smart thing to do is that, always consult your CA or your lawyer or your consultant before you make any significant business, financial or contractual decision, so that you are protected from any negative fallout, because of any non-compliance or violation which is in most cases are inadvertent but are unlikely to be excused because of non malafide intentions.

At the same time knowledge of the law, important fiscal laws such as VAT, Income Tax could give you an idea of what kind of service you are getting from your professional who is entrusted with the responsibility of keeping you in good financial and legal shape.

Unlike the biological system, you are in good financial shape if you are obese and of course good legal shape means being very slim and not being weighed down by a lot of litigation, law suits, income tax notices, hearings, appeals and other proceedings under any fiscal law. On rare occasions, there may be someone in the profession who may take advantage of you. You could be aware of this kind of conduct if you have a basic knowledge of the laws connected with finance, taxes, contracts and other mercantile legislations. It could in fact , install in you an early warning system against ICBM�s, like the �Sachin Tendulkar Bill� which in lakhs was pretty close to his batting average and the single bill was probably more than the gross billing of a decade of many small town CA�s. However, I hasten to add, whoever submitted the �Sachin Bill� (there is nothing wrong with it ) deserves to be congratulated, it sure is a powerful inspiration to youngsters entering the profession and if it can rock a person of Sachin�s standing, then many others would probably go bankrupt. Anyway, good luck, and I hope you enjoy reading this book.

If you are a professional, well, it is a very good idea to have a client, who is well informed and don�t think that a knowledgeable client, would be someone who would question your actions or someone who you will not be able to take for granted. In fact , on the flip side a knowledgeable client would become aware of the pain and the difficulties involved in assuring that he/she is complying with all provisions of the law and who knows he may readily agree to an increase in your professional bill.

So, this is one book that you could gift to your client or you can include it as a freebie along with your professional bill. And those of you who don�t want to miss an opportunity to do a little bit of business, well, you could consider distributing this book but of course as a professional you are not allowed to do business. What you could do is you could make your wife a distributor for this book and that would mean a tacit partnership between you and your wife, in which case she becomes your sleeping partner even during the day. If she reneges in her promise to share the profits, then steal it from her, because if she is still in love with you, she won�t call the police. Anyway, as a professional too, I hope you too enjoy reading this book.. So, go right ahead to the next Chapter.

Chapter III

(A Primer On The Service Tax Act . Likely to be published in a book called �Educate Your Client�.)

As stated in the detailed contents of chapter III, that as far as my professional memory serves the Service Tax Act, which is a relatively recent piece of legislation, is one of the most dangerous pieces of fiscal laws that I have ever seen. I have had a ringside view of people who have suffered devastating consequences because they underestimated the respect that it should have commanded. Anyway, Service Tax, essentially, as the name of the Act itself suggests, is a levy as a percentage of the taxable service or a percentage of the billing amount which currently is pegged at 12% with an educational surchage of 3% of the tax calculated. Like VAT you can get an input credit of the amount of service tax that you have paid in respect of services that you have used in the business, against your total service tax liability .This is classified or is generally known as CENVAT Credit.

What are the services that are taxable? A more appropriate question could be, What are the services that are not taxable? . It�s very difficult to identify one, anyway we will come to that later. As each finance budget is passed annually, more and more services are being added to the list of taxable items and as of now this list is headed towards infinity. One of the very blaring and conspicuous inapplicability of service tax to a particular profession is the vocation of lawyers and it is some kind of an uncanny co-incidence that this Service Tax Act was probably drafted by a battery of lawyers. So, while this list is heading, as told earlier, towards infinity it will in all probability be one short of that magical figure . Anyway, lawyers have expensive habits, they drink the best whisky, they travel first class, stay in the best hotels and with this kind of monthly bills to be paid there probably won�t be any residual income left for payment of service tax. We CA�s,(Chartered Accountants) the equivalent of CPA�s, are however, liable to service tax and on a comparative scale while , lawyers are sipping expensive wines , poor CAs are filling their goblets with French Polish. As a CA I am not cribbing, I am just plain jealous that these lawyers are such a lucky lot and most of my professional colleagues appreciate the fact that as of now they have not started a pension fund for lawyers with service tax collected from CAs!

Anyway we are giving at the end of this chapter, the list of all the taxable services as it currently stands, plagiarized from the Service Tax Act, and that is quite a long one, the number would be in excess of 200. And as far as the recent budget proposals are concerned the threshold exemption limit is likely to be increased to Rs. 8,00,000 from the existing 3,00,000 limit. This means good news for a lot of professionals, as the limit of 8,00,000 ,particularly in smaller towns, is not always attained by most professionals especially those running small proprietorship concerns. Let�s hope this proposal is enacted into an irreversible law. One last word of caution regarding the Service Tax Act, sleuths from the Accountant General�s Office look at the billing figure you have returned to the Income Tax Department , compare it with the billing amounts that you have given to the Service Tax department and if the two figures are not exact twins the consequences would be of shuddering proportions. It has happened!

In this chapter we are going to discuss some of your obligations under the Service Tax Act and we are clubbing them below as follows:

(a) How to get a registration under the Service Tax Act?

(b) The time limit under which your application for registration is to be given

(c) The computation of service tax liability

(d) When is this service tax or liability to be discharged

(e) What are the returns to be filed and the frequencies to be filed indicating the details of your income receipts and taxes due? levy

(f) What are the penalties and interest leviable for non-payment or delay in payment of service tax?

(g) What are the circumstances in which service tax is liable to be deducted from expenditures incurred by a payment in respect of the taxable services that he has used?

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