The so-called service tax was first mooted two years ago in the national budget, with the move dividing practitioner opinion across the country’s legal profession. Now, according to a report on local web site Live Mint, published in conjunction with Legally India, the finance ministry has conceded several points, which has only served to muddy the waters further.

Foreign clients

In essence, according to the report, individual lawyers and law firms are subject to the legal services tax unless they are advising another lawyer or law firm, any person other than a business entity, or a business with a turnover of up to 1million rupees.
Considerable confusion existed over whether services provided by Indian law firms to foreign clients would be subject to the tax. But according to the report, the position has been clarified -- those services are taxable because they are provided within India.

Taxing justice

Just as there is uncertainty over the practicalities of the tax, there is disagreement over its wider implications to the legal profession. Asked whether treatment of foreign companies under the tax regime presented Indian firms with a problem, Lalit Bhasin, chairman of the Society of Indian Law Firms was nonchalant. ‘Not really,’ he said. ‘One is reconciled to this, that service tax has to be paid.’
But others are less relaxed. Amarjit Singh Chandhoik, president of the Delhi High Court Bar Association, told the web site: ‘We are not happy with the situation because in this country the constitution provides justice for everybody, so you can’t tax the justice delivery system.’