Legal eagles, who have escaped the service tax net so far, may not be so lucky in Budget 07-08. The government is considering bringing legal consultancy under the service tax net.
Sources said there was a strong case for bringing legal services to corporates under the tax net. Legal consultancy, especially in business circles, is a growing sector in view of the hectic M&A activity under way in India Inc as well as intellectual property rights filings.
However, representing in a court may be kept out of the ambit. The model followed in the case of chartered accountants may come in handy. Since companies cannot represent in court of law, there was a case for bringing them under the tax net. Chartered accountants, who had challenged the levy of service tax, had argued against it giving the example of lawyers.
Finance minister P Chidambaram had earlier said in due course all services, barring a negative list of essential services, would be brought under the service tax net. The parliamentary committee on finance has also asked the government to bring all services, barring essential ones, under the service tax net. The Centre, which has proposed to transfer legal advisory and representation services in the different fields of law, legal advisory and representation services in statutory procedures of quasi-judicial tribunals, boards, legal documentation and certification services, is likely to retain corporate consultancy services under its ambit.
According to Luthra & Luthra founder and managing partner Rajiv Luthra, if all the services of similar nature are subject to service tax, there is no reason to keep lawyers out. But, like doctors, who have been kept out of the net, lawyers too have a noble profession to perform, and they render a service which is very fundamental to the society.