ALL about Legal Services under GST

All about legal services under GST

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ALL about Legal Services under GST

The question that will be answered in this article is whether the services given by lawyers are taxable or exempt. Also we will discuss about who is liable to pay tax on their services. We will discuss all the peculiarities about legal services here.

“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”.

The legal services provided by the following shall be EXEMPT if it is given to specified person.

  1. A partnership firm of advocates or
  2. An individual as an advocate (other than a senior advocate)

The specified persons to whom the service shall be given are

  1. Any person other than a business entities;
  2. A business entity with an aggregate turnover up to RS. 20,00,000/- (Rs. 10,00,000 in case of special category states) in the preceding financial year.
  3. Another Individual advocate or partnership firm of advocates
  4. Services provided to Central Government, State Government, Union Territory, Local Authority or Government entity.

The above provision means GST shall be levied on legal services if it is provided by partnership firm of advocates or an individual as an advocate (other than a senior advocate) to business entity with an aggregate turnover above RS. 20,00,000/- (Rs. 10,00,000 in case of special category states) in the preceding financial year. It hardly makes a difference whether the Business Entity is registered or unregistered in the preceding year.

The next question is who is liable to pay tax in this case. The answer is Business Entity needs to pay tax under Reverse Charge Mechanism (RCM) as per Section 9(3) of the CGST Act. The business entity needs to register itself if above conditions are met and follow all the compliances.

It also implies that a partnership firm of advocates or an individual an advocate (other than a senior advocate) need not register under GST if they are indulged only in exempt supply or supply liable to RCM whatever be the amount of turnover.

Let us now discuss if the services are provided by SENIOR ADVOCATES. The legal services provided senior advocate shall be EXEMPT if it is given to the following:

  1. Any person other than a business entities;
  2. A business entity with an aggregate turnover up to Rs. 20,00,000/- (Rs. 10,00,000 in case of special category states) in the preceding financial year.
  3. Services provided to Central Government, State Government, Union Territory, Local Authority or Government entity.

The above provision means GST shall be levied on legal services if it is provided by senior advocate to business entity with an aggregate turnover above Rs. 20,00,000/- (Rs. 10,00,000 in case of special category states) in the preceding financial year. It hardly makes a difference whether the Business Entity is registered or unregistered in the preceding year.

Also the service shall be taxable if the same is provided by senior advocate to another Individual advocate or partnership firm of advocates.

In both the cases mentioned above GST is payable by recipient under the RCM as per Section 9(3).

Carefully analyzing, the second situation is the only situation in which Lawyer needs to get himself registered under GST i.e. a lawyer needs to register under GST if he is taking services from senior advocate because liability to pay tax will be on the recipient advocate. Obviously, if turnover of the lawyer is below 20 lakhs he shall be eligible to take the exemption as a service given to Business Entity below turnover of 20 lakhs. Government shall issue clarification in regard to this.

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