Applicability of GST on Chamber Practices of Advocates

1. Introduction

Advocates provide legal services to their clients in different branch of law such as corporate law, taxation, competition law, Intellectual Property Right (IPR) and many more. Most of us have this perception that advocates are the one who appear and represent in Court on behalf of their clients. However, some advocates prefer to provide legal services via. chambers. Chambers in general sense refers to a private room and in legal terms means judge’s private office wherein he or she hears motions, signs papers, and performs other tasks pertaining to his or her office when a session of the court is not being held.

The term ‘Chamber Practice’ is neither defined under the Finance Act, 1994 nor under the GST Law. Normally, advocates practicing solely in chambers takes care of non-litigation matters such as providing legal advice, opinions, consultancy, drafting of documents, assistance in compliance, etc. and do not represent themselves in the Court on behalf of the client. Sometimes, advocates along with chamber practice also provide representational services in Court.

The issue which arises for consideration is that whether the services of individual advocates engaged solely in chamber practice can be brought to tax net under the Service Tax or GST.

In the past few months there has been a lot of controversy on advocates receiving notices from the department under Service Tax/GST to prove that they are practicing lawyers and services provided by them are not chargeable service tax or GST. Though the controversy has been put to end by the Hon’ble Orissa High Court but still advocates across India are receiving notices on the similar issue.

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This article highlights applicability of GST on Chamber Practice of Advocates in the wake of legal provisions under the erstwhile Service Tax Regime, GST regime and the order pronounced by the Orissa High Court and cover other related issues as well.

2. Position under the erstwhile Service Tax Regime

Services provided by the advocates were not included in the Negative List per se but were covered in the mega exemption notification and reverse charge which are given as under:-

• Rule 2(cca) of the Service Tax Rules, 1994, defines “legal service” which 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.
• As per Notification No. 30/2012-ST dated 20-6-2012, any legal services provided or agreed to be provided by individual advocate or a firm of advocates by way of legal services, directly or indirectly, the service tax shall be paid by the service receiver i.e., business entity located in taxable territory on 100% on value of service under reverse charge mechanism (RCM).
• As per Serial No. 6 of Notification No. 25/2012-ST dated 20-6-2012 (mega exemption notification), services provided by individual advocate or firm of advocates are exempt from the levy of Service Tax. The relevant extract of the notification is reproduced as under:-

b) an individual as an advocate or a partnership firm of advocates by way of legal services to—

i) an advocate or partnership firm of advocates providing legal services:

ii) any person other than a business entity; or

iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year;

3. Position under the GST Regime

The relevant extracts of the notifications regarding the treatment of legal services of advocates are reproduced below:

• As per Para 2(b) of the Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017, “Advocate” has the same meaning as is assigned to it in clause (a) of sub-section (1) of section 2 of the Advocates Act, 1961 (25 of 1961). As per Advocates Act 1961, “Advocate” must be entered in any roll under the provisions of this Act. “Roll” means a roll of advocates prepared and maintained under this Act.
• The term “legal service” has been defined under Para 2(zm) of Notification No. 12/2017-Central Tax (Rate) which 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;
• As per Serial No. 45 of the Notification No. 12/2017-Central Tax (Rate), services provided by individual advocate or firm of advocates are exempt from the levy of GST. The relevant extract is reproduced as under:

b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-

i) an advocate or partnership firm of advocates providing legal services;

ii) any person other than a business entity;

iii) a business entity with an aggregate turnover up to such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)]; or

iv) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity;

• Notification No. 13/2017-Central Tax (Rate) dated 28-6-2017 specifies services which are chargeable to tax under reverse charge. As per Serial No. 2 of the said notification, services provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly to any business entity located in the taxable territory, GST in this case shall be paid by the business entity under reverse charge mechanism.
• Also, as per Explanation c) of the Notification No. 13/2017-Central Tax (Rate), the business entity located in the taxable territory who is litigant, applicant or petitioner as the case may be, would be treated as the person who receives the legal services for the purpose of this notification.

4. Analysis & Discussion:

• In view of the provisions of Service Tax discussed above-advice, consultancy or assistance in any branch of law is covered under the legal services. Further, legal services provided by the individual advocate are either exempt or are taxable in the hands of the recipient if received by the business entity under reverse charge. Thus, legal services including services provided in a chamber by the individual advocate/firm are not liable to Service Tax under forward charge and hence, there is no requirement to obtain registration under Service Tax per se.
• As seen above, the taxability of legal services provided by the individual advocate under the provisions of GST Law are similar to that of Service Tax in the manner that legal services by individual advocate/firm are either exempt or liable to tax as per reverse charge mechanism.
• This fact cannot be denied that advocates have been receiving notices asking them to furnish documentary evidence to prove that they are practicing as an individual lawyer and does not come under the provision of GST or service tax. Few months back, the Hon’ble Orissa High Court in the case of Devi Prasad Tripathy vs. Principal Commissioner CGST and Central Excise, Bhubaneswar and Others expressed its concern in respect of harassment faced by the advocates on account of Department issuing notices to them and demanding service tax/GST when they are exempted from doing so and in the process, they are also required to prove that they are practising advocates. The Court also directed to issue clear instructions to all the officers in the GST Commissionerates in Odisha that no notice demanding payment of service tax/GST will be issued to advocates rendering legal services and falling in the negative list, as far as GST regime is concerned. The Court further quashed such notices issued to the advocates when the matter was taken in the next hearing. The Hon’ble Court’s action was welcomed by the advocates all over India.

Summary of the taxability of legal services:

The taxability of legal services are summarized below:

• Service Tax Regime

Services Provided by	Services Provided To	Taxability
Individual Advocate/Firm of Advocates (other than senior advocate)	Advocate or partnership firm of advocates providing legal services	Exempt
	Any person other than a business entity
	Business entity with a turnover up to Rs. 10 lakhs in the preceding financial year
	Business entity located in taxable territory with a turnover of more than Rs. 10 lakhs in the preceding financial year	Taxable under Reverse Charge

• GST Regime

Services Provided by	Services Provided To	Taxability
Individual Advocate/Firm of Advocates (other than senior advocate)	Advocate or partnership firm of advocates providing legal services	Exempt
	Any person other than a business entity
	Business entity with an aggregate turnover up to Rs. 20 lakhs (not registered)
	Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity
	Business Entity having turnover of more than 20 lakhs in the preceding financial year located in Taxable Territory	Taxable under Reverse Charge

5. Services of Chamber Practice by Senior Advocates

Para 2(zzd) of Notification No. 12/2017 – Central Tax (Rate), provides that ‘senior advocate’ has the same meaning as assigned to it in Section 16 of the Advocates Act, 1961. As per Advocates Act 1961, ‘Senior Advocate’ means an advocate who may be designated as senior advocate, if Supreme Court or High Court is of the opinion that by virtue of his ability standing at Bar or special knowledge or experience, in law, he is deserving of such distinction.

The taxability of legal services in relation to chamber practice provided by senior advocate are almost similar to that of individual advocate/firm of advocates. However, services provided by senior advocates to individual advocate/firm of advocates is taxable in the hands of senior advocates.

The provisions regarding taxability of legal services rendered by senior advocates are summarized as under:

Services Provided by	Services Provided To	Taxability
Senior Advocate	Advocate or partnership firm of advocates providing legal services	Taxable under forward charge
	Any person other than a business entity	Exempt
	Business entity with a turnover up to Rs. 20 lakhs in the preceding financial year
	Business entity located in taxable territory with a turnover of more than Rs. 20 lakhs in the preceding financial year	Taxable under Reverse Charge

6. Other Issues Relating to Chamber Practice

a) Other Services provided along with legal services by the advocate

As discussed above, legal services including chamber practice are not subject to levy of service tax/GST in the hands of advocates. However, when the advocate is providing other services (taxable) along with legal services (exempt) and the aggregate turnover exceeds the threshold limit of Rs. 20 lakhs, then the advocate is required to obtain GST registration and charge GST on the portion of taxable services.

b) Legal Services rendered to foreign clients

Sometimes, advocates also give legal assistance to the clients located abroad. Now the question arises regarding taxability of legal services-will it still be exempt or not?

As the legal services rendered by individual advocate are specifically exempted from GST, it shall continue to remain exempt even if provided to foreign clients. Another school of thought which emerges is that legal services provided outside India will be treated as ‘export of services’ if the conditions specified under Section 2(6) the Integrated Goods and Services Tax Act, 2017 (IGST Act) are satisfied. Even though the exports can be done without payment of tax under LUT but for obtaining LUT, GST registration is required.

In some cases, the place of supply may not be outside India, for instance, legal assistance given to foreign clients with regard to their property in India. Thus, the taxability needs to be examined from case to case.

7. Concluding Remarks

• As per the above legal provisions and discussions, it is very clear that in pre-GST as well as post-GST regime, legal services provided by the individual advocate/firm of advocates including consultancy and assistance in any branch of law is not taxable in the hands of the individual advocates/ firm of advocates per se.
• As far as Chamber practice of the proprietor is concerned, it is very well included within the ambit of legal services both in Service Tax and GST in the form of consultancy and assistance, and hence, Service Tax or GST is not required to be charged by the advocate.
• Such notices issued to individual advocates under Service Tax or GST are bad in the eyes of law as also highlighted by the Hon’ble Orissa High Court and can be very well challenged as the there is no ambiguity in the taxability of legal services including chamber practices.
• It is highly recommended to advocate/firms that where their services are covered under RCM, must mention in their invoice that tax is to be paid by service receiver under RCM.

Disclaimer: The views expressed in this article are personal.