Lawyers have threatened legal action over the Government's new service tax as Delhi litigators are going on strike over the issue today.
The Society of Indian Law Firms (SILF) and the Delhi Bar have objected strongly to last Monday's Budget proposals, which would see law firms get charged service tax for their legal advice.
SILF president Lalit Bhasin told Legally India: "I think that not much thought had been given to this proposal. Our idea is to involve the Law Minister and soon we shall be talking to the Finance Minister on this issue."
"And if nothing happens on that front, we may move to the court as a last option."
The lawyers in the Delhi High Court and all the Delhi lower courts are also going on a one day strike today (9 July) to mark their protest against the Government's decision.
The service tax proposal specifically exempts lawyers practising as individuals or appearing in court and excludes any legal advice given to individuals.
Delhi High Court Bar Association secretary D K Sharma said: "How can you say that individual lawyers shall not be affected? The law firms consist of individual lawyers only. What if the clients refuse to pay additional 10 percent? This amount shall be deducted from the pocket of the individual lawyer only."
He added: "The government must rethink on this issue. We are taking this matter very seriously and would not even hesitate in challenging the law once it is passed."
The Supreme Court Bar Association (SCBA) has rallied behind the decision of the lower court's bar.
SCBA's secretary Pareena Swaroop told Legally India: "The Executive Committee of Supreme Court will decide how to go about on this issue but personally I feel that the service tax on law firms is totally uncalled for and I support the strike called by the Delhi High Court Bar Association."
SILF's Bhasin added: "Indian law firms are already facing threat from the foreign law firms and instead of creating a level playing field, the government is reducing the potential of Indian law firms engaged in transactional work."
Managing partner of Titus & Co Diljeet Titus commented: "I am not against the tax being levied on law firms but its implementation would prove to be a nightmare. I think it should be either on all the services or on none."
"The non-litigation market is only worth Rs 500 crore and the government shall get only Rs 50 crore as tax and ultimately it is the client who has to bear the cost," he said and added that the cost of non-litigation services would increase by 10 percent.
The Bar Council of India is in favour of the new tax, according to a press report immediately following the budget.
The planned tax is due to come into force when the Finance Bill is passed in the first week of August.