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Service tax will add to litigation cost: Bar

Legal Correspondent

Clients and not lawyers will pay tax; it is a disincentive


They only assist court in dispensation of justice Lawyers on warpath, particularly in south

New Delhi: The All-India Bar Association has opposed Finance Minister P. Chidambaram's proposal to bring lawyers under the service tax net.

By no stretch of imagination can it be said assistance provided by lawyers to their clients will amount to rendering a `service' to warrant imposition of the tax, chairman and vice-chairman Adish C. Aggarwala and S. Prabhakaran said in a statement here.

"Lawyers only assist the court in dispensation of justice and such assistance cannot be described as a service." Clients and not lawyers would pay a tax on legal services. "A legal services tax is not a tax on lawyers, but a tax on those who seek legal advice. Lawyers may pay the tax bill, but the taxes and the cost of administering the payments will be passed on to the clients in the form of higher bills."

Legal services tax

The statement said, "A legal services tax is a disincentive for citizens to seek legal advice." Many transactions such as property transfers and administration of estates required payment of taxes. A legal services tax would impose an additional levy on the same transaction and add to the burden of those already experiencing financial problems.

"Clients seeking legal advice on dissolution of marriage, bankruptcy, debt collection and similar matters are those who can least afford to pay an additional charge."

Tax law specialists

Many citizens sought advice from tax law specialists for clarification of their tax obligations. A tax on legal services would ironically impose an additional tax on those who were looking for ways to reduce their tax burden, the association said.

Lawyers in several parts, particularly in southern States, were on a warpath opposing the proposal to introduce a service tax bill in the budget session of Parliament.

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