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Reverse service tax mechanism on legal consultancy

25 January 2017

Sir

My client is delhi based private limited company . its turnover in F y 2013-14 is less than Rs 10.00 lacs. they recieved legal service from advocate. shoud he pay service tax on RCM.

My point is, i have gone throungh notification no 26 & 30. 2012 which deal with mega exemption and RCM. and i have read some article and analysis on various tax related portals. some expert say that RCM on legal consultany is payable by business entity only when its turnover for last F y is more than 10.00 lacs

now service tax dept is conduction scrutiny of my client company and they are raising a demand for RCM on legal conslutancy.

Pleas sugget me, should we pay RCM on legal service recieved. does mega exemtion notification no 26, 2012 apply here and prevail over Notification no 30. 2012

Its urgent.

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6 Replies

Nagendra Hegde (Chartered Accountant) (1948 Points)
Replied 27 January 2017

Mega exemption notification is 25/2012 dated 20.06.2012 (amended time to time)

S.No 6(b) of the said notification provides for exemption in case of legal services provided by an advocate / firm of advocates to a business entity with a turnover up to rupees ten lakh in the preceding financial year.

30/2012-ST provides who is liable to pay service tax. This would comes into picture only when the service is taxable in the first instance.

As far as body coproprate doesnot exceed 10L aggregate TO in preceeding FY, RCM would not be applicable on legal services received by it.

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Arpit verma (Indirect tax) (1372 Points)
Replied 28 January 2017

exemption for 10 lacs will not be applicable to assessee paying service tax under reverse charge . notification no. 33/2013.
as per facts given in your case, you are liable to pay service tax.

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Arpit verma (Indirect tax) (1372 Points)
Replied 28 January 2017

notification no.33/2012

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Nagendra Hegde (Chartered Accountant) (1948 Points)
Replied 28 January 2017

Dear Arpit verma, Though what you said is generally right, in case of legal services there is a specific exemption given in Mega exemption notification 25/12-ST (S.No 6(b)).

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Nagendra Hegde (Chartered Accountant) (1948 Points)
Replied 28 January 2017

Dear Arpit verma, Though what you said is generally right, in case of legal services there is a specific exemption given in Mega exemption notification 25/12-ST (S.No 6(b)).

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Arpit verma (Indirect tax) (1372 Points)
Replied 28 January 2017

Yes Nagendra sir, I have review mega exemption notification. s.no. 6 (b) (iii) , and I am agree with you. As per mega exemption notification, Rs. 10lacs will be consider in case of legal service (i.e.in the given case, we are not liable to pay service tax under reverse charge )

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