There is a typical judgment these days that suppliers of the legal services (advocates being individual or advocates managing a firm) are outside the ambit of GST. Be that as it may, this fact is absolutely wrong in the wake of examining the different provisions in a broad way. Under the new tax policy called “Goods and Service Tax“, services given by a lawyer (being individual or firm of advocates) is taxable under GST.
According to the Notification No. 12/2017 (Central Tax-Rate) dated 28th June 2017, coming up next are the services which are exempted from GST tax.J
1. Whether GST is applicable on services of an advocate?
Yes. The services of an advocate are applicable to GST.
Services given by-
- An individual supporter (other than a senior promoter) or by the firm of advocates, by method for legal services to-
- An individual supporter or a firm of advocates who are providing legal services;
- Any individual other than a business firm; or
- A business firm who’s the turnover of the entire year is up to 20 lakh rupees in the previous fiscal year.
- Legal services by a senior advocate as well-
- Any individual except a professional firm or
- A professional firm, who’s the turnover of the whole year, is up to 20 lakh rupees in the preceding money fiscal year.
2. How is GST Charged in cases of services of an advocate?
It is quite clear that the legal services, additionally incorporates advisory services given by the advocates (regardless of whether individual or firm) and coming under the reverse charge of GST law.
3. What is the reverse charge mechanism under GST?
As per the reverse charge mechanism, the compulsion to settle government liability moves from the provider of the service to the ultimate beneficiary of goods/services.
4. How does the reverse charge mechanism apply here?
The reverse charge mechanism applies in case of services of an advocate, as below-
- At the point when advocate being an individual (which also includes a Senior Advocate) or a group of advocates who are giving any legal services to a business firm. The firm must be having a turnover of INR 20 Lakhs, or more in the past fiscal year, that is, it’s having GST registration; and
- At the point when a Senior Advocate gives legal services to another promoter (being an individual) or firm of advocates.
- Thus the firm taking legal services must also have a GST registration.
5. How did the government approve GST on legal services?
The Ministry of Finance had stated on 15th July 2017:
- There are few issues raised with respect to the GST suitability of on the services given by legal lawyers—regardless of whether it will be exempted, or is to be charged under the reverse charge.
- This account clarifies and clarified that legal service means any service which is given in connection to consultancy, guidance, or legal help to an individual. Anyway, this is in any part of law and before any council, specialist or court.
If refer to a notification issued under Central Tax Rate, it provides that services given or provided by a
- Promoter being an individual or
- By a senior supporter
- By method for speaking to the customer
- Under the observation of any council, court or expert,
- Straightforwardly or in a roundabout way,
- To a business substance (situated in the taxable region), and
- Incorporates any assention or any agreement for the arrangement of such legal service has been entered by means of another individual backer or advocates (being a firm of advocates), or by a firm of advocates, to a business element.
On the issue the Central Board of Excise and Customs (CBEC) has issued an announcement expressing:
- There is no adjustment as far as taxation on the supply of legal services in post GST period.
- It likewise illuminated that legal services additionally incorporates illustrative services given by advocates (regardless of whether individual or firm) and are secured under the reverse charge of GST.
- Under the reverse charge mechanism the risk to settle government obligation move from the provider of the service to the beneficiary of goods/services.
Besides, it is likewise cleared up that notification No. 13/2017-Central Tax (Rate) dated 28.6.2017 states that the accompanying services are secured under reverse charge mechanism,
Services provided by a promoter (being an individual backer or a senior supporter) by method for speaking to its customers
- Under the steady watch of any council, court or specialist,
- Specifically or by implication,
- To a business substance (situated in the taxable domain), and
- Involves any presence of any agreement for the arrangement of such legal service has been entered by means of another individual promoter or advocates (being a firm of advocates),
- Or by a firm of advocates, by the method for legal service, to a business firm.