Dr. Sanjiv Agarwal
Finance Act, 2010 has expanded the scope of service tax of legal consultancy services w.e.f. 1st May, 2011
Finance Act, 2011 has substituted the definition of taxable service under clause 65 (2105) (zzzzm) as follows –
“Taxable service means any service provided or to be provided
(i) to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner;
(ii) to any business entity, by any person, in relation to representational services before any court, tribunal or authority,
(ii) to any business entity, by an arbitral tribunal, in respect of arbitration.
Explanation – For the purposes of this item, the expressions “arbitration” and “arbitral tribunal” shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996;’;
The amended definition seeks to specify and expand the scope of legal consultancy services to cover –
(a) services provided by a business entity to individuals in relation to advice, consultancy or assistance in any branch of law;
(b) representational service before a judicial or quasi-judicial authority provided by any person to a business entity, and
(c) include arbitration service provided to any business entity by a arbitral tribunal;
It may be noted that representational services provided to individuals will continue to be exempt form levy of service tax. Also services provided by individuals to other individual shall remain outside the scope of taxable services.
Arbitration & Conciliation Act, 1996 defines the words ‘arbitration’ and ‘arbitral tribunal’ as follows –
‘Arbitration’ means any arbitration whether or not administered by permanent arbitral institution [section 2 (1) (a)]
‘Arbitral Tribunal’ means a sole arbitrator or a panel of arbitrators [section 2(1) (d)].
Taxability Matrix (Wef 1.5.2011)
| Service provider | Service receiver | Taxability | Service |
| Individuals | Individuals | No | Any service |
| Any person including Individuals | Business entity | Yes | Representational service before court / tribunal / authority |
| Business entity | Any person including Individuals | Yes | Advice, consultancy & assistance in any branch of law |
| Business entity | Business entity | Yes | Any service |
| Arbitrators | Business entity | Yes | Arbitration |
| Individuals | Business entity | No | Advice, consultancy & assistance in any branch of law. |
As a latest update, Delhi High Court has granted an interim stay on 29.4.2011 on levy of service tax individual lawyers rendering services to business entities on a Writ Petition No 2792 filed by Delhi based lawyers till next date of hearing ,ie, 23rd May, 2011. This may just be the beginning of long legal battle. Gauhati high court has also granted interim stay.
Related Posts:-
Guwahati High Court stays notification levying service tax on lawyers
Delhi High Court held levy of service tax on Commercial Rent Unconstitutional
Respected Sir
May I know the applicability of GST for the Arbitration that took place after 1st July 2017 for the Arbitration fees / deposit already paid prior to 1st July 2017?
What is the validity of the claim if the Arbitration Fees (upwardly revised) and the GST charges being levied after 9 months of the Arbitration?
Andhra Pradesh HC has also stayed!
If an individual lawyer provides following services, will it be correct to say that he is not liable for any service tax?
Rs.5 lacs Individual to individual (No service tax)
Rs.5 lacs Individual to Business entity (advice, consultancy and assistance) (No service tax)
Rs.9 lacs Individual to Business entity (representation service before sourt)(Less than the limit of taxable service of Rs.10 lcs).
Pl specify.
1) Due to stay in the High court relating to Service Tax apllicablity on Individuals (Lawers) relating to representational service before court / tribunal / authority are not required to Pay till the case is settled ????
2) Wether same is applicable if service tax is payable on Reverse charge mechanisim (i.e on import of legal consultancy services)?
1) Due to stay in the High court relating to Service Tax apllicablity on Individuals (Lawers) relating to representational service before court / tribunal / authority are not required to Pay till the case is settled ????
2) Wether same is applicable if service tax is payable on Reverse charge mechanisim (i.e on import of legal consultancy services)