Cash accounting method of Professional

[ANIL ANIKHINDI]

It is well settled principle that all professionals like CAs, CMAs, Advocates, CSs etc. follow cash accounting system as against mercantile accounting system. They are preparing bills against provision of services from time to time. But the receipt of fees from clients is certain as to period. Sometimes they may receive payments even after 6 months, especially in case of Govt. audit assignments. Moreover some of the clients deduct certain amount from the billed amount and pay short amount than invoice amount. So far they are following cash accounting system, as such it does not matter much. Even the service tax law at present also permit them to pay on actual receipt basis rather than billed basis. In GST regime, they will be required to raise tax invoices against supply of services and charge GST accordingly. The recipient may avail ITC on the basis of such Invoices, but the supplier may account for only against receipt of value. In the circumstances stated above how to comply with the GST law? Whether they have to continue to follow cash accounting system or they are required to switch over to mercantile system?

AI Summary

Professionals Transition from Cash Accounting to GST: Must Issue Tax Invoices Upon Service, Pay Tax on Billing A discussion on a professional forum addresses the transition from cash accounting to GST compliance for professionals like accountants and lawyers. Traditionally, these professionals followed a cash accounting system, receiving payments irregularly and sometimes less than invoiced due to deductions. Under GST, they must issue tax invoices upon service provision, allowing recipients to claim input tax credit, but suppliers account for income upon receipt. A query arises on whether to continue cash accounting or adopt the mercantile system. Responses clarify that under GST, service tax is payable upon billing, and prior rules allowing cash basis for certain turnovers no longer apply. Concerns about unpaid pre-GST bills are also raised.