Management guru Peter Drucker once confided, "My greatest strength as a consultant is to be ignorant and ask a few questions." That may not comfort most of us who invariably find management consultants to be an inscrutable class of people. But it should comfort us that we are not alone; the Finance Ministry too seems to have the same problem. Why else would North Block be changing the definition of `management consultant' over the last two years?
`Management consultant' stands at No. 18 in the list of services, sandwiched between `interior decorators' and `practising chartered accountants', on www.servicetax.gov.in. Services rendered by these professionals came into the service tax net with effect from October 16, 1998, along with nine other services.
The phrase `management consultant' was originally defined as "any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or upgradation of any working system of any organisation," in the Finance Bill that formed part of Mr Yashwant Sinha's Budget, presented on June 1, 1998.
The service, which has a special number, Section 65(65), came in for a revamp in 2006. Its scope was extended with effect from May 1, 2006, by `specifically including consultancy in different areas of management, e.g., human resource management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management,' as http://dateyvs.com explains.
The phrase `other similar areas' is wide enough to cover `managerial functions in relation to environment, compliance, strategic decisions, coordination, control, productivity, efficiency, operations, processes, and so on,' postulates Dr Sanjiv Agarwal in his book Assessee's Guide to Service Tax (www.swpindia.com).
`Management consultant' has successfully kept the draftsman busy. In 1999, the Department issued a letter to clarify that ESI, PF and industrial law practitioners are not covered by the term `management consultant'. In 2001, the taxman gave an elaborate explanation, after checking with the Indian Institute of Management Ahmedabad, that services rendered in respect of M&A (merger and acquisition) are covered by the service in question. In 2004, a notification exempted ERP (enterprise resource planning) service from the scope of management consultancy.
And, now, the Finance Bill, 2007 has changed Section 65(65) from `management consultant' to `management or business consultant'. Aren't business consultants management consultants as well, wonders a city-based CA, Mr Srivatsan Ranganathan?
At least Wikipedia thinks so: A search for `business consultant' redirects one to a page on `management consulting'. It says: "Management consulting (sometimes also called strategy consulting) refers to both the practice of helping companies to improve performance through analysis of existing business problems and development of future plans, as well as to the firms that specialise in this sort of consulting."
Let's be ready, therefore, to see `strategy consultant' too coming in sometime soon to rub shoulders with the other two consultants in Section 65(65).