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Breaking: Delhi HC stays service tax on advocates, gov’t to respond by 23 May

Breaking Exclusive: The Delhi High Court has stayed the imposition of service tax on individual advocates under the Finance Act 2011, according to two lawyers with knowledge of the case.

It is understood that the court directed the government to respond to the petition by the Delhi High Court Bar Association, pending which the service tax would not be in effect.

Advocate Dushyant K Mahant, who is currently in the Delhi High Court, told Legally India that the government would have to reply by 23 May and until then tax would be stayed.

In an earlier message on Twitter he wrote: “Chief Justice & Justice Khanna of Delhi High Court stays levy of service tax on lawyer in the interim.”

Economic Laws Practice Delhi-based advocate Shashi Mathews added: The writ petition was filed by the Delhi High Court Bar Association, and the Hon’ble Division Bench of the Delhi High Court comprising of Hon’ble Mr. Justice Dipak Misra and Hon’ble Mr. Justice Sanjiv Khanna has been pleased to restrain the Union of India from giving effect till the next date of hearing i.e. 23.05.2011 to the notification issued by the Ministry of Finance, Government of India imposing Service Tax on Professional Services rendered by the lawyers.”

The service tax on individual advocates has proved controversial since it was proposed in the 2011 Union Budget.

Recently the government made a concession to lawyers on the service tax point of taxation rules, acknowledging the burden on lawyers that would have occurred if service tax were payable as soon as bills to clients were issued.

Update 15:47: ITATonline.org has also flashed the news of the court staying lawyers’ service tax after the Delhi Bar Association’s writ petition WP No. 2792 of 2011. Plus the site has a very handy guide on service tax payable by lawyers.

Correction 17:40: The original version of the story stated that the petitioner was the Delhi Bar Assocation, when it was in fact the Delhi High Court Bar Association. We regret the error, which has now been corrected.

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