No service tax on legal outfits working as proprietorships
September, 04th 2009
Experts say that many of the legal outfits shall not come under the purview of the service tax that is to be imposed on legal consultancy services owing the fact of their being sole propriety in nature providing consultancy services to corporates that include drafting merger and acquisition agreements, preparing MoUs, rendering advice and so on.
As the service tax will apply on advice provided by a business entity to another business entity, sole proprietorships will not come within the purview of the proposed service tax, said Diljeet Titus, senior partner of law firm Titus and Co.
Atul Gupta, member of the ICAI Executive Committee (northern region) expressing a similar opinion said, as sole proprietorships are not business entities they will not be required to pay service tax.
This is a discrepancy and needs to be corrected.
Only law firms, which are business entities under the Indian Partnership Act or the Limited Liability Partnership Act, will be have to pay service tax on fees charged from corporates, said Hemant Batra, lead partner Kaden Boriss.
While proposing to extend the ambit of service tax to cover legal advice and consultancy, finance minister Pranab Mukherjee in his budget speech clarified, This (service tax) will not be applicable in case the service provider or the service receiver is an individual.