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NEW SCOPE OF LEGAL SERVICES |
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NEW SCOPE OF LEGAL SERVICES |
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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 (105) (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; (iii) 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 (court, tribunal or authority) provided by any person to any 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 Finance Act, 2011)
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 Delhibased lawyers till next date of hearing ,ie, 23rd May, 2011. This may just be the beginning of long legal battle.
By: Dr. Sanjiv Agarwal - April 30, 2011
Discussions to this article
Gauhati High Court has also granted stay. "by a business entity" and "by any person" are two different expressions used in relation to the same service. It can be considered that both have different purposes and meanings therefore, a possible view is that expression 'any person' in this context does not include 'business entity' . This will be a point of litigation. It will now be advisable to have seperate charges for consultancy and appearance/ representation. "arbitral tribunal' - as per my understanding arbitral tribunal will be different in case of eacharbitration matter. A person actring as arbitrator cannot be regarded as arbitral tribunal, he singly or with some other arbitrators (in particular case), as the case may be constitute ''arbitral tribunal', therefore, it may be that each rbitral tribunal shall be considered as a separate unit of service provider. If it is not so intended, then an amendment is desirable.
Gauhati High Court has also granted stay. "by a business entity" and "by any person" are two different expressions used in relation to the same service. It can be considered that both have different purposes and meanings therefore, a possible view is that expression 'any person' in this context does not include 'business entity' . This will be a point of litigation. It will now be advisable to have seperate charges for consultancy and appearance/ representation. "arbitral tribunal' - as per my understanding arbitral tribunal will be different in case of eacharbitration matter. A person actring as arbitrator cannot be regarded as arbitral tribunal, he singly or with some other arbitrators (in particular case), as the case may be constitute ''arbitral tribunal', therefore, it may be that each rbitral tribunal shall be considered as a separate unit of service provider. If it is not so intended, then an amendment is desirable.
These are interim stays and lets wait for next week when these cases are listed. I feel that stay will gat vacated
Sanjiv Agarwal
What about export of service by an Advocate to foreign client for his work outside India whether service tax liability will attract or not if attracts outside India who will charge and pay as reverse charge is applicable only in territory of India. Mahesh Gupta Advocate
Dear Sir , The Place of Provision of Services Rules, 2012, would determine the place where the services shall be provided. According to Rule 3 of Place of Provision of Services Rules, 2012, the place of provision shall be the location of the service receiver. In case, the location of the service receiver is not available, then place of provision shall be the location of service provider. In the instant case, services are provided by an advocate to a foreign client for his work outside India. As per rule 3 of Place of Provision of Services Rules, 2012, the place of provision shall be the location of the foreign client which is outside India. Therefore, no service tax liability would arise. Thanks & Regards , CA Neha Somani
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