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Courts/Legal Issues
Service tax on law firms evokes mixed response
The Finance Minister, Mr Pranab Mukherjee.
Our Bureau
New Delhi, July 7
Mr Pranab Mukherjee has done what his predecessor Mr P Chidambaram would not. He has brought the legal eagles under the service tax net. The service tax rate is 10.3 per cent.
Taking a dig at his predecessor in his Budget speech, the Finance Minister said, “…..although there is a school of thought that legal consultants do not provide any service to their client, I hold my distinguished predecessor in high esteem and disagree! As such, I propose to extend service tax on advice, consultancy or technical assistance provided in the field of law. This tax would not be applicable in case the service provider or the service receiver is an individual.”
In fact, services provided by chartered accountants, cost accountants, and company secretaries as well as by engineering and management consultants are charged to service tax. The proposal by the Finance Minister has generated a mixed response from the legal fraternity. Says President of The Society of Indian Law Firms, Mr Lalit Bhasin, “This is not a step in the right direction. It would stifle the growth of the law firms, when there is threat from foreign law firms.”
Besides, levy of service tax on law firms will not get any substantial revenue for the Government, he said, adding that “there are only 80-100 law firms in the country which could generate revenues. But, they also cannot be compared with big global firms.”
However, Mr O.P.Vaish, Corporate Tax Lawyer, felt that “Even though law firms have been brought under the service tax, we are happy. This was understandable and due for a while. On the whole, the tax proposals are very good and unusually rational.”
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