Service Tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 March 2010 Sir/Madam,
Good morning.My IPCC exam is may,2010.So in this matter i have a problem that i do not have any study notes on the taxable services of 'Legal Consultancy Services'.SO kindly help me as soon as possible before the exam.

Thanking You.

Krishna Sarathi Pati

Querist : Anonymous

Querist : Anonymous (Querist)

18 March 2010 Please send it to my e-mail:bol2krishna@gmail.com

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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24 July 2025 Certainly! Here's a concise study note on “Legal Consultancy Services” under Service Tax law as applicable before GST (and for May 2010 IPCC exam):

📘 Service Tax on Legal Consultancy Services (As applicable before GST)
✅ 1. Introduction:
Legal Consultancy Services were brought under the Service Tax net by Finance Act, 2009, with effect from 1st September 2009.

✅ 2. Definition [as per Section 65(105)(zzzzm)]
“Legal consultancy service” means any service provided:

By a business entity

To any other business entity

In relation to advice, consultancy or assistance in any branch of law (excluding appearance before a court, tribunal or authority).

✅ 3. Who is Liable to Pay?
Service provider: If the provider is a law firm or LLP, it is liable to pay.

Reverse Charge Mechanism (post-2012): If service is provided by an individual advocate to a business entity, then the service recipient is liable to pay.

🔸 For May 2010 exam: Reverse charge was not yet applicable (introduced in 2012). So liability was on service provider.

✅ 4. Exemptions:
Legal services not taxable in 2010:

Services provided by individual advocates to individual clients (non-business entities).

Representation before courts was excluded (not considered “consultancy”).

✅ 5. Taxable Value:
Gross amount charged for legal consultancy, excluding reimbursed expenses (if separately mentioned).

✅ 6. Rate of Tax (for May 2010 exam):
10% basic Service Tax

Education Cess: 2%

SHE Cess: 1%

Effective Rate: 10.3%

📌 Example:
ABC Law Firm provided legal advice to XYZ Ltd. and charged ₹1,00,000.

Service Tax = ₹10,000

Edu Cess = ₹200

SHE Cess = ₹100

Total Tax = ₹10,300

Gross Invoice = ₹1,10,300

✅ 7. Points to Remember:
Legal consultancy does not include litigation.

Only business-to-business legal services taxable.

Business entity includes companies, firms, associations, etc.

✍️ Likely Exam Question (IPCC Style):
Q: Is legal consultancy service provided by an individual advocate to a business firm chargeable to Service Tax? If yes, who is liable to pay?

Ans:
Yes, legal consultancy service provided to a business entity is taxable. As per the law applicable up to 2010, the service provider (advocate) was liable to pay Service Tax.

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