The Event and Entertainment Management Association (EEMA) today said its delegation met Finance Minister Pranab Mukherjee and asked for reversal of the new service tax norms affecting the sector.
According to the new Point of Taxation rules proposed in the Budget for 2011-12, service tax will be levied at the point of raising invoice to the client irrespective of collections made from rendering of service.
"There is no point in collecting service tax where the services have not actually been rendered. Since service tax is proposed to be charged on the basis of invoices raised, it will put most of the services providers in negative cash flows," EEMA said in a statement.
Under the proposed rule, the tax has to be paid even if there is delay in receipt of payment from client. "And there is no mention of remedy available to the assessee for non-receipt of payments against bills," it added.
The new rule is expected to come into affect from April 1 and EEMA is of the view that it will be detrimental to the sector.
"The Finance Minister gave the delegation a patient hearing and took a note of all the points discussed," the statement said.
Under the existing service tax rules advances received from clients are already taxed at full rate.
"This itself is creating hardship to genuine service providers and tax payers as in many cases advances have to be repaid and self adjustments can be done only to a limited extent," EEMA said.
According to EEMA -- which represents entities operating in the fields of event management, experiential marketing and brand activation -- the point of taxation cannot be decided simply on the basis of receipt of advance or raising of an invoice since in many cases rendering of services are deferred for a long time on the request of service recipient.
Some of the other proposals related to service tax made during the Budget like bringing treatment in hospitals with 25 or more beds have already come under criticism from various sections.
