At first the Practising Chartered Accountants can be classified into two categories viz. ‘Subject to Service Tax’and ‘not Subject to Service Tax’, whether they are practising in their Individual capacity or in Partnership with others either as a Partnership Firm or as Limited Liability Partnership Firm (LLP). Whatever may be their status (Individual/Partnership Firm/LLP) if they do ‘interstate service’ they have register themselves compulsorily under the GST as provided in section 24(1) CGST Act irrespective of the fact that their Aggregate Turnover i.e. their gross receipts are being less than Rs. 20 Lakhs. As per section 7(3) of IGST Act Inter-State Supply means the services rendered in a state other than the home state and services rendered in home state for a Company situated in another state. As most of the CAs are doing Audit of Banks, whose Head Offices are generally situated in another state, they must register under GST and start collecting GST for all the services, though their gross receipts are less than Rs. 20 Lakhs. For those who were hitherto out of Service Tax Net, since their gross receipts were less than Rs. 10 Lakhs, they can start afresh and pay GST at applicable rate of 18% on raising the Bills. Many CAs., who were following cash system of accounting for Income Tax purposes,cannot follow cash system under GST, for which Mercantile System can only be followed.
The CAs who were already in Service Tax net are of two classes. Those CAs, whose gross receipts exceeded Rs. 50 Lakhs, are already paying Service Tax on due basis (mercantile system) i.e. on raising the bills, though in certain cases they may be following ‘Cash System’ for Income Tax purposes. They can continue to pay on same lines in the GST regime also.
For those CAs, whose gross receipts were between Rs. 10 Lakhs and Rs. 50 Lakhs and who were paying Service Tax on receipt basis, for the bills raised till 30.06.2017, they would be receiving payments from 01.07.2017, which would include Service Tax, which was charged @ 15% (including cess). But from 01.07.2017, they cannot account/collect Service Tax since GST has come into effect in lieu of Service Tax. In my opinion, for such receipts, they have to raise new bills with 18% GST in lieu of the old bills followed by receipt and pay accordingly to enable the person (registered under GST) who is paying, to claim credit for the payment he is making. Even if the party is an end customer who is not registered under GST, then he would be paying the Total Bill Amount, which would include the 15% ST and here also new bill is to be raised in lieu of old bill with 18% GST followed by receipt. In both situations, the extra burden of 3% is to be borne by the payer. A question may arise how a GST bill can be raised for services rendered before 01.07.2017. But there is no other option, because ST cannot be collected from 01.07.2017 and even if collected, neither it can be paid nor Service Tax Return can be filed because the last period for which Service Tax Return can be filed is for the three months ending 30.06.2017, which is already over.
In the transitional provisions, this issue is not addressed viz. ‘Procedure to be followed for those who were paying ST on receipt basis till 30.06.2017 for the collections made from 01.07.2017 for bills raised till 30.06.2017’.