New tax for professionals

Wary of the bureaucratic hassles that the new levy would create, Narendra Patel, a consulting engineer said, “We can only hope that they treat professionals like professionals and not as criminals, if there is any discrepancy in the calculations. We would expect that at least for the first six months, the department officials should guide us in the implementation of the tax.”

Patel also mentioned that in most cases, retired government officials act as consultants in order to share their experiences, and not necessarily for a livelihood. “Often, consulting engineers use a minimum of staff for their services. With the introduction of this scheme, the staff members will have to be increased for computing these details,” Patel added.

However, taxes on the vast and unorganised sector of mandap owners is expected to be the most difficult to impose. Prakash Mehta, an advocate and practising lawyer on service taxes in the Bombay High Court, is unequivocal in his assessment. “The Excise department officials themselves would find it difficult to monitor the sector,” he said.

According to the trade notification issued by the department, mandap owners owning immovable property rented out for social functions like marriages, and those owning marriage and banquet halls would be liable to pay the tax.Mehta pointed out that temples, churches and other religious organisations which offer their premises for social functions and collect donations toward their charitable functions, might find themselves taxed under this scheme.“These religious organisations might have to get a sanction from the income tax commissioner if they want to carry on their business. Because, otherwise, under the charity commissioner, they cannot conduct business that is taxed as an income,” said Mehta.

What remains unclear is whether mandap decorators, who hire out furniture and light fittings, are a part of the tax net. The trade notification mentions a clause which says that mandap owners also owning the business of light fixtures and furnitures will be taxed. “We are eagerly waiting for a trade circular to be issued by the excise commissioner, which will clarify most matters on the issue,” said Mehta.