The Delhi High Court on Friday stayed the government's decision to impose a 14% service tax on senior lawyers, who are so designated by either the high courts or the Supreme Court because of their stature or knowledge of law.

The union budget had withdrawn the service tax exemption given to services offered by these senior advocates to an advocate or partnership firm of advocates providing legal service; and people represented on arbitral tribunals.

This move to widen the tax base was challenged by the Delhi High Court Bar Association. A senior advocate is an officer of the court assisting it in dispensation of justice and the service cannot be treated for taxation purposes, it argued. Another petition filed by senior advocate Kavin Gulati called the decision discriminatory and ultra vires the Constitution. The Gujarat High Court also stayed the government order, on March 30.

The tax had been objected by lawyers who argued that it would leave them at the mercy of the inspector raj in the tax department. The levy would lead to an increase in fees charged by them from clients, they claimed. Gulati's petition claimed that the tax would not mean more revenue to the exchequer as it only shifted the burden of compliance and payment on to senior advocates from the recipients of their services.

If the notification had not been stayed, senior advocates would have been required to register themselves with the tax authorities within 30 days. They were required to deposit service tax on an accrual basis irrespective of actual receipt of payment from the clients.