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Budget 2012: Court work exempt from service tax, law firms stay in net

Gov't Lions still gobble up lawyer fees but not in court
Gov't Lions still gobble up lawyer fees but not in court

Breaking: Fees earned by lawyers in courts or tribunals will not be subject to service tax under the Union Budget, which expanded the overall scope of service tax to everything except for a few exceptions.

One of these exceptions, in section 143 (C) of the Finance Bill, which amends the definition of “service” in the Finance Act to exclude “fees taken in any Court or tribunal established under any law for the time being in force”.

Lawyers have protested the widening of the service tax net to include lawyers since the 2009 budget, which initially only applied to lawyers in law firms charging fees but resulted in protests from the Society of Indian Law Firms (SILF) and strikes in solidarity by advocates.

Later the SILF filed a second writ petition against the law after advocates and arbitrators advising businesses were also drawn into the service tax rules in the 2011 budget, and the Supreme Court Bar Association (SCBA) also resolved to challenge the law.

SILF chairman Lalit Bhasin commented: “It’s a good thing, at least they’ve realised that – and I hope they would exempt even the transactional work. That is where the law firms are hit. I am very happy that at least tribunal and court work stands exempted. But I think this should be extended to all activities to legal profession.”

“It is a good step but it is an inadequate step.”

Commenting on SILF’s writ petitions, Bhasin joked: “Our earlier petitions are pending now we have to add one more petition. But first we will try to convince them [the government] before the budget is passed”

Hat tip to @DKMahant on Twitter for first pointing out the change in rules.

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