“Law firms in India have reported a turnover of Rs 500 crore during the financial year 2009-10 and have been for the first time brought under the service tax net, which was Rs 50 crore for this period,” the ministry said in an internal note reports HT.

The ministry has asked the Bar Council of India (BCI), the apex regulator for legal profession in the country, to frame a code of conduct for these firms.

“The BCI regulates only advocates who are enrolled with it. Law firms as such are not required to register themselves before any statutory authority or require permission to engage in non-litigation practice,” said the ministry document. It has pointed out that several non-legal firms have exploited the lack of clear guidelines by employing law graduates and using their services for profit.

The BCI has said it is in the process of framing a code of conduct, which is likely to be finalised soon. “We want all the law firms operating in India to provide details of their employees, annual returns and the nature of business they are indulging in,” said a BCI functionary.

The regulator is also likely to add a mandatory clause for all the firms employing advocates to declare a conflict of interest, if any, before taking up the brief from any client.

The ministry has also rejected the argument of law firms that foreign firms should not be allowed to take part in arbitration (out of court settlements) proceedings in the country.