Courts paralysed as lawyers strike

Delhi’s high court and district court lawyers held a day-long strike on 24 March to voice their opposition to the imposition of tax on legal services. The protestors argue that the provision of legal advice cannot be defined as a service because lawyers are only assisting the court its administration of justice. Some lawyers say that, at times, this advice is provided without charging a fee.

Services provided by way of appearance before any court, tribunal or authority are currently exempt from service tax. However, the Finance Bill, 2011, proposes to levy 10% service tax on lawyers. Many say this will directly increase legal bills, and reduce the extent to which clients can negotiate their fees. “Clients would be required to pay service tax on bills raised by law firms, which themselves are a very high amount,” Shilpa Sharma, head of indirect tax at Vaish Associates told India Business Law Journal.

The new tax will apply to law firms rendering advice, consultancy and assistance in the corporate, commercial and transactional stream, but will not apply to sole practitioners or to clients who are individuals. However, sole practitioners rendering services to law firms and companies will be mandated to pay tax if the bill is passed. Lawyers appearing in courts and tribunals are also covered and liable to pay tax. The tax, if introduced, will come into force once the Finance Bill is passed.