How to have an ignorant opinion about the Service Tax on legal services…

Written by  //  March 29, 2011  //  Law & The Judiciary  //  2 Comments

So the service tax on individual lawyers is going to see the light of day, and barring a Stay on the provisions of the Finance Act issued by one of the nation’s 21 High Courts or the Supreme Court of India, lawyers across the nation will have to stream into their local Service Tax offices and get their registration numbers within a month of the Finance Act, 2011 coming into force (if they haven’t already done so.)

Naturally this has raised the hackles of many, none more so than the Delhi High Court Bar Association which found no better way to express its outrage and apoplexy than by calling a strike on, what assumes was sheer co-incidence, the day of the World Cup Quarterfinal featuring India and Australia (as others have also noticed) Inspired by their noble example, I have begun a one-man campaign to get the Supreme Court Bar Association to call for a similar strike on, to pick a day at random, oh say, this Wednesday.

My hopes have been raised thanks to this wilfully ignorant and blatantly silly statement issued by those guardians of India’s legal services, the Society of Indian Law Firms and the All India Bar Association. [I wasn’t able to find the full statement myself, but the Hindu report linked seems to have more or less the entire statement (as do the other newspaper reports of the same)]

“The legal profession is an integral and important part of our system of administration of justice, so much so that a lawyer is considered as an officer of the court. A lawyer renders service to the court as a vehicle for effective administration of justice. He provides his expertise and assistance to clients as a part of over all service to the court. Can a Service Tax be legally and justifiably levied on services rendered to the court?”

“lawyers in India historically and traditionally have been spearheading initiatives in the field of politics, justice—social and economic, and human rights, etc. Lawyers played a pivotal role in our freedom struggle and lawyers have been Presidents, Prime Ministers and Speakers. Even today lawyers are represented in the Union Council of Ministers and as Leaders of the Opposition. Our Head of State belongs to this profession.”

“by no stretch of imagination it could be said that legal assistance provided by lawyers to their clients would amount to rendering a ‘service’ to warrant imposition of ‘service tax.’ He said “lawyers only assist the court in dispensation of justice and such assistance cannot be described as a service.”

It’s a wonderful example of how to hold an ignorant opinion about pretty much anything really. One needs a ritual invocation bestowing oneself with a false halo of importance or righteousness, a pinch of doublespeak, a dash of disingenuity and topped off with a coating of mendacity, and voila! your statement is all over the newspapers and you get to appear pompous and feel self-important.

First comes the ritual invocation. Leaders of the freedom struggle were lawyers, and therefore all lawyers must be automatically invested with a halo of righteous superiority. One wonders if the freedom fighters gave up ALL their earnings, their freedom and their bodily integrity to ensure that lawyers in the future could whine and throw a tantrum to avoid paying taxes.

It’s also a delicious bit of doublespeak really. On the one hand, the statement waxes eloquent on the many fine qualities of Indian lawyers and in the same breath encourages lawyers to throw every one of those ideals into the ditch by going on a strike; something which the Supreme Court hasheld to be a serious breach of professional ethics and morality.

Of course, while we are on doublespeak, disingenuity shouldn’t be ignored. As any lawyer capable of reading will tell you, the Act only imposes the service tax on legal services provided by individual lawyers to business entities and all legal services provided by law firms. Where the common man figures in all of this is a little hard to fathom, unless, like the present dispensation in New Delhi, the common man is in fact code for “those with enough money to afford law firms”.

Finally, we have mendacity. The enormous lie that lawyers provide no “services” but are just merry little elves trained in the law helping judicially-minded Santa Clauses dole out the Christmas goodies throughout the year.

Please.

The burden of the service tax will not lie on the lawyer in the mofussil dealing almost exclusively with individuals as clients. It will not fall on the lawyer starting out in the profession depending the odd brief sent his way by a generous senior. It won’t affect in the least those genuine professionals who tirelessly turn out for true public causes in fora, big and small, not for the glamour of the spotlight but because it’s the right thing to do.

Nor will the burden fall on the clients of such lawyers.

Anyone who can read can tell that the burden lies exclusively on lawyers whose practice depends on business entities who pay large fees, and of course on such business entities whose legal fees are going to go up by 10.3% from the next financial year.

When the impost of service tax is being passed on, almost exclusively, to balance sheets of India’s leading corporates and other business entities, one wonders why such furious opposition to a tax that will not demand a single extra rupee from the pocket of an individual practicing lawyer?

Are the distinguished legal luminaries of AIBA and SILF incapable of discerning the difference between a direct tax, like the income tax, and an indirect tax, such as the service tax?

Are they worried about loss of business?

Hardly.

I don’t foresee the heads of major companies suddenly calling Dawood Ibrahim or the local thug to settle disputes just because the cost of legal services has gone up by about 10.3%.

Or more pragmatically, are they now worried that there is one more Government department that might, just might, take a closer look at the Supreme Court parking lot and wonder how much tax the owner of that Audi SUV paid last year?

One can understand that there are genuine concerns about the machinery provisions to enforce this tax, especially the requirement to pay the tax as soon as the bill is sent to the client. But surely, that is a matter to be taken up with the Central Board of Excise and Customs to clarify through a circular or a notification to ease these concerns. Some clarifications are also genuinely needed on issues such as service taxes on opinions, filing fees, clerkage, et al.

Yet, these seem to be the least of AIBA’s and SILF’s concerns. As far as they are concerned, practicing lawyers in India have some divine right (because it can’t obviously be a Constitutional Fundamental Right) not to be taxed by the State for the services they provide.

2 Comments on "How to have an ignorant opinion about the Service Tax on legal services…"

  1. Talha March 30, 2011 at 3:03 pm ·

    Agree with your concerns Alok. Just as with hospitals people, typically, participate in court proceedings out of sheer compulsion. If the service tax on luxury hospitals, branded by some as ‘misery tax’ is withdrawn – this should also be rolled back.

    It will indirectly pay the government to mess with the corporates! Higher the stakes, higher the fees, higher the taxes!

  2. Isabell Hargenrader September 9, 2011 at 6:00 am ·

    What is a blogging site that allows you to sync with facebook for comments?

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