|Image Courtesy:Honourable Supreme Court of India|
The Honourable Supreme Court of India on Monday stayed levy of service tax on legal services provided by individual lawyers and law firms. The long running dispute arised by the amendment to Finance Act 1994 in 2009 where any business is made liable to pay tax for the services done to other business entities in relation to advice, consultancy or assistance in any branch of law, in any manner. The Amendment however exempted any service of appearance before any court, tribunal or authority from tax. Here the law was applicable to advocate firms and not individual lawyers. But the amendment brought forth in 2011 made it applicable to individual lawyers who appear in several Courts and other forums also. But for services rendered by individual lawyers to other individuals, there was no tax levy. Thus if any lawyer or law firm provides services to other business entity is liable to pay service tax for various services in field of law including appearing in Courts and other forums.This had ignited several protests from lawyers and legal luminaries. By 2012 notification individual lawyers are exempted from service tax. But business entities receiving services of individual Advocates are made liable to pay service tax on reverse charge basis ie. the service receiver will have to bear the service tax.
Last year in PC Joshi vs Union of India and others a petition filed by Advocates Association in Bombay High Court stated that the levy will impede the ability of litigants to have access to the judicial system. They also stated that the relationship between an advocate and a litigant before court of law is that of a representative of a litigant and not that of a service provider and recepient. The point of discrimination to individual service recepients and large business entities to bear the tax burden was also arised as an issue. The Court however had dismissed the petition and upheld taxation stating that the role of legal profession has changed and it is no longer limited to appearances before Court. Court added that as there is rational and intelligible differentiation, there is no discrimination.
As the service tax was increased to 14%, the present order of Supreme Court bench headed by Honourable Chief Justice was received with a sigh of relief by lawyers and businessmen.
News Courtesy:Finanacial Express; Times of India