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The Service Tax net was expanded to the Legal Consultancy service from 01.09.2009. The Taxable service was defined under Section 65(105)(zzzzm) of the Finance Act, 1994. The Legal services provided to a business entity by any other business entity in relation to advice, consultancy or assistance in any branch of law were covered.

However, the services provided by way of appearance before any court, Tribunal or any authority and the services provided by the individuals were excluded.

Now, the Finance Minister has proposed in the Finance Bill 2011 to expand the scope of legal consultancy services falling under the tax net.

The following proposed substitution is made in sub-clause (zzzzm):

(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;

Thus, the following services are included:

(i) Services of advice, consultancy or assistance provided by a business entity to individuals are covered.


(ii) Representational services provided by any person to a business entity; and


(iii) Services provided by arbitrators to business entities.

Now, as per the Notification No. 45/2011 – Service Tax In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services referred to under item (iii) of sub-clause (zzzzm) of clause (105) of section 65 of Finance Act, 1994.

Therefore, services provided by arbitrators to business entities will be exempted and will now remain outside the tax net and this notification will be effective from 12th Sept, 2011.

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Category Service Tax   Report

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