Nalin Kumar Nohria

Since March, 2016 there has been number of amendments has been made in respect to service tax on legal services and the same has been discussed as under.

Notification No. 18/2016-ST dated 01.03.2016 has amended Notification No. 30/2012-ST dated 20.06.2012 due to which, in respect of legal services which were covered under full reverse charge has been amended as follows

ParticularsPercentage of Reverse charge
Service by a firm of advocates or an individual advocate other than senior advocate, by way of legal services100%
Services by senior advocate0%

 Thus legal services provided by a senior advocate has come under forward charge rather than full reverse charge from 01.04.2016

Further, Notification No. 34/2016-ST dated 06.06.2016 has again amended Notification No. 30/2012-ST dated 20.06.2012 due to which, in respect of legal services reverse charge mechanism has been amended w.e.f. 06.06.2016 as follows

ParticularsPercentage of Reverse Charge

Service by an individual advocate or a firm of advocates by way of legal services other than representational services by senior advocates,

100%

Service provided or agreed to be provided by 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, and the senior advocate is providing such services, to such business entity who is litigant, applicant, or petitioner, as the case may be

100%

 It is hereby clarified that Senior Advocate has been defined in Service Tax Rules as the meaning assigned to it in the Section 16 of the Advocates Act, 1961.

In order to avoid confusion in respect of point of taxation, a proviso has been added in Rule 7 of Point of Taxation Rules, 2011 vide Notification no. 21/2016-ST dated 30.03.2016 which is reproduced as under

Provided also that where there is change in the liability or extent of liability of a person required to pay tax as recipient of service notified under sub-section (2) of section 68 of the Act, in case service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the point of taxation shall be the date of issuance of invoice”

Thus according to the above proviso, point of taxation will be the date of issuance of invoice & service receiver will be liable to discharge the service tax liability even if payment has not been made. The above proviso is only applicable when there is change amendment in Notification no. 30/2012-ST dated 20.06.2012

Thus, in case of legal service provided by a Senior Advocate, invoice has been issued and payment has not been made by the business entity, then point of taxation will be as follows

Sr.No.ParticularsPoint of Taxation
1.Invoice issued prior to January, 2016Date next to 3 months from date of invoice, payable by business entity as per Rule 7
2.Invoice issued between 01.01.2016 and 31.03.2016Date of issue of invoice, payable by business entity as per Proviso to Rule 7
3.Invoice issued between 01.04.2016 and 05.06.2016No reverse charge payable by business entity and forward charge payable by service provider as per Rule 3
4.Invoice issued on or after 06.06.2016Full reverse charge, payable as per Rule 7 by business entity

There has been amendment in mega exemption list i.e. Notification No. 25/2012-ST dated 20.06.2012 vide Notification no. 09/2016-ST dated 01.03.2016 and Notification No. 32/2016 dated 06.06.2016 in respect of legal service provided by senior advocate as under

  • w.e.f. 01.04.2016 till 05.06.2016 service by a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession is exempt from service tax.

It is clarified that even if turnover of business entity in previous year is less than 10 lakhs, service tax on service provided by senior advocate is NOT exempted

  • On or after 06.06.2016 service by senior advocate to (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakhs in the preceding financial year is exempt from service tax.

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