GST On Legal Services – Clarification By Finance Ministry

The Finance Ministry has issued important clarification by way of a press release dated 15th July 2017 regarding the controversy whether legal services are subject to GST or not.

Position regarding applicability of GST on Legal Services provided by individual Advocates including Senior Advocates and a Firm of Advocates.

There are points being raised about the applicability of GST on legal services provided by advocates – whether it is in forward charge or reverse charge. It may be mentioned that there is no change made in taxation of legal services in the GST era.

In this context, it is further clarified that legal service has been defined to mean 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.

It is further clarified that notification No. 13/2017-Central Tax (Rate) dated 28.6.2017 (Serial No. 2)specifies, inter alia,the following service under reverse charge mechanism,-

“Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity.”

The words “by way of legal services” are preceded and succeeded by comma. Therefore, the said words apply to an individual advocate including a senior advocate and a firm of advocates. Legal services provided by either of them are liable for payment of GST under reverse charge by the business entity.The words “by way of representational services before any court, tribunal or authority….” appear in conjunction with senior advocate without a comma and merely describe the nature and mode of representational services provided by a senior advocate to a business entity. It, therefore, follows that legal services, which includes representational services, provided by advocates are under reverse charge.

See also: JK Mittal & Co vs. UOI (Delhi High Court) GST on legal services: There is no clarity whether all legal services (not restricted to representational services) provided by legal practitioners would be governed by the reverse charge mechanism. Legal practitioners are under genuine doubt whether they require to get themselves registered. The Court directs that no coercive action be taken against any lawyer or law firms for non-compliance with any legal requirement under the CGST Act, the IGST Act or the DGST Act till a clarification is issued by the Central Government and the GNCTD and till further orders in that regard by the Court

2 comments on “GST On Legal Services – Clarification By Finance Ministry
  1. VIMLESH DOSHI says:

    Is it correct, to interprete that, Individual Advocate(s) or Firm of advocates are not required to get registered them under GST Regim, untill they may cross threshold limit? GST on Fees they may charge shall be paid by Service Receiver (Client) under RCM ?

    • Sanjay Shukla says:

      Yes, what’s emerging from the above clarification is that the legal services rendered, by Advocates and/or a firm of advocates, are covered by the Reverse Charge Mechanism and the concerned business entity, which avails such legal services, shall be solely liable for payment of GST under reverse charge.

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