GST on Legal Services Provided by Individual Advocate, Senior Advocate, and Partnership Firm of Advocates
Question: What are Legal Services defined under GST Law?
Answer: Legal Services are defined by the Government through Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017. As per Para 2(zm) of the notification, Legal service includes advice, consultancy, or assistance in any branch of law, along with representational services before any court, tribunal, or authority. This encompasses legal opinions, advice, consultancy, and court appearances.
Question: Are legal services taxable under GST Law?
Answer: Yes, legal services fall under the definition of supply and are taxable under GST law. However, whether they are taxable under Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM) depends on government notifications.
Question: Is there any exemption for legal services under GST Law?
Answer: Yes, certain legal services are exempted under Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017. Entry No. 45 of the exemption notification provides exemption to legal services provided by a partnership firm of advocates or an individual advocate (other than a senior advocate) to certain entities or individuals meeting specified criteria.
Question: Who are an Advocate and Senior Advocate?
Answer: As per the exemption notification, ‘Senior Advocate’ refers to those designated as such by the Supreme Court or High Courts based on their ability, standing at the bar, or special knowledge/experience in law. ‘Advocate’ refers to those enrolled in any roll under the Advocates Act, 1961.
Question: Is there any difference between Advocate and Lawyer?
Answer: Yes, advocates are law graduates registered with the Bar Council, authorized to represent clients in court, while lawyers can provide legal advice but cannot represent clients in court unless they are enrolled advocates.
Question: Who is a Business Entity under GST?
Answer: A business entity refers to any person carrying out business activities as defined under the CGST Act, 2017.
Question: Describe the taxability of legal service under RCM?
Answer: Legal services provided by individual advocates, including senior advocates, or firms of advocates are taxable under RCM. The recipient of the service, typically a business entity, is liable to pay GST under RCM.
Question: Is GST registration mandatory for Legal Services?
Answer: GST registration is mandatory if the turnover exceeds specified limits or if engaged in inter-state transactions.
Question: What is the legal position in case of export/import of Legal Services?
Answer: Export of legal services is taxable but may qualify for exemption under certain conditions. Import of legal services is taxable under RCM.
Question: Whether ITC can be availed on legal service?
Answer: Input Tax Credit (ITC) cannot be availed on legal services provided in India due to the RCM mechanism.
Question: Whether reimbursement of expenses charged by Advocates is taxable?
Answer: Taxability of reimbursement of expenses depends on the nature of expenses incurred and whether they qualify as ‘Pure Agent’ services.
Describe the taxability of legal service under RCM?
As mentioned above, the Central Government has empowered under Section 9 of the CGST Act, 2017 to issue notification to covers Services or Goods or both, where tax is to be paid by recipient under RCM. Therefore, in exercise of the powers conferred by sub-section (3) of section 9 of the CGST Act, 2017, the Government has issued a Notification No. 13/2017 – Central Tax (Rate) dated 28th June, 2017 regarding list of services under RCM. Entry No. 2 of the said RCM Notification is concerned with ‘Legal Service’. Entry No. 2 of RCM Notification–
Categories of Supply of Services
Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly. Explanation- “Legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.
Supplier of Service
An individual advocate including a senior advocate or firm of advocates.
Recipient of Service
Any business entity located in the taxable territory
RCM liable to pay by business entity @ 18% (Recipient of Service)
Is there any exemption to legal services under the GST Law?
Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year;
(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to
– (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year;
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year.
Disclaimer: The information provided here is for educational purposes only and should not be construed as legal advice. While efforts have been made to ensure accuracy, errors may occur, and no liability is accepted for any loss or damage arising from the use of this information.
