In this write up I tried to summarise all the relevant provisions under GST on Advocate Services
1) Relevant Definitions:
i) Legal Services
The definition of legal services has been provided under entry 2 of notification no. 12/2017 – Central tax (rate) dated 28.06.2017 which is reproduced hereunder:
“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
ii) Advocate
The definition of Advocate states “advocate means an advocate entered in any roll under the provisions of this Act”
iii) Senior Advocate
There shall be two classes of advocates, namely, senior advocates and other advocates. An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability standing at the Bar or special knowledge or experience in law he is deserving of such distinction. (3) Senior advocates shall, in the matter of their practice, be subject to such restrictions as the Bar Council of India may, in the interest of the legal profession, prescribe. (4) An advocate of the Supreme Court who was a senior advocate of that Court immediately before the appointed day shall, for the purposes of this section, be deemed to be a senior advocate.
2) Exemptions under GST
Services Provided by:
Arbitral Tribunal
1) Any person other than business entity
2) Business Entity with aggregate turnover upto Rs.20 lakhs in Previous
financial year (10 lakhs in case of special category states
3) Central govt/state government/union territory /legal authority/Governmental
authority /governmental entity
Services Provided by:
Partnership Firm of advocates or an individual as an advocate other than a senior advocate by way of legal services
1) Advocate or partnership firm of advocates providing legal services
2) Any person other than business entity
3) Business Entity with aggregate turnover upto Rs.20 lakhs in Previous
financial year(10 lakhs in case of special category states
4) Central govt/state government/union territory /legal authority/Governmental
authority /governmental entity
Services Provided by:
Senior advocate by way of legal services
1) Any person other than business entity
2) Business Entity with aggregate turnover upto Rs.20 lakhs in Previous
financial year (Rs10 lakhs in case of special category states)
3) Central govt/state government/union territory /legal authority/Governmental
authority /governmental entity
Additional Note:
Special Category Status: the states under this category are: Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand
3) Taxability under Reverse Charge Mechanism
- Supplier of service: Services supplied by an individual advocate including a senior advocate or firm of advocates by way of legal services directly or indirectly :
- Recipient of Service: To business entity having turnover more than 20 lakhs located on taxable territory
- Who is Liable to Pay Tax: Business entity having turnover more than 20 lakhs located on taxable territory
4) Place of supply
As Legal services don't fall in any of the specific provisions for Place of Supply General Rule under section 13 will become applicable
The rule provides that the place of supply of services is the location of the person receiving the services.
However, if the recipient of service is not available in the ordinary course of business, the place of supply is the location of the supplier of services.
5) Time of supply
Time of supply will be determined by the Provision governing reverse charge mechanism, as legal services are taxable under reverse charge mechanism :
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. In case of reverse charge, the time of supply shall be the earliest of the following dates—
(a) The date of payment OR
(b) The date immediately after SIXTY (60) days from the date of issue of invoice by the supplier.
6) Can the liability under Reverse Charge Mechanism be adjusted through Input Tax Credit?
Any amount payable under Section 9(3) of CGST Act and Section 5(3) of IGST Act, which means Reverse Charge shall be paid by cash only. Reverse charge liability cannot be discharged by using input tax credit.
7) Rate of Tax on Legal Services?
In case GST is applicable, the GST rate applicable on legal services would be 18%.
8) What if Legal services are Exported?
As per Notification No. 13/2017 – Central Tax (Rate), RCM is applicable on legal services provided to Business Entity. In case services are provided outside India, then RCM is not applicable as the Business Entity is located outside taxable territory.
Export of service is considered as inter state transactions therefore GST Registraion is mandatory
For Export of services, Export procedures under GST must be followed. In pursuance to Notification No. 16/2017 read with Circular No. 8/8/2017, export can be done in two ways either on payment of IGST on export supplies or file Letter of Undertaking.
As per rule 96A of CGST Rules, 2017, the foreign inward remittances must be received within one year from the date of invoice. In case remittance is not received within the prescribed time then exporter has to deposit IGST from his own pocket, which is 18% of such supplies.
9) Some Frequently Asked Questions
Registration Aspects
Is an advocate providing interstate supply chargeable under Reverse Charge liable for registration?
Exemption from registration has been provided to such suppliers who are making only those supplies on which recipient is liable to discharge GST under RCM.
Since the legal services provided by an advocate are covered under RCM, Advocates are exempted from GST Registration.
Therefore, If Legal Services are not exempt and recipient is located in the taxable territory having a business entity then, the recipient shall get himself registered in GST to pay tax under reverse charge.
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