Legal Services under GST Law

1. Definitions

a. Legal Service – As per S. No. 2(zm) of Notification No. 12/2017 – Central Tax (Rate), 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.

b. Advocate – As per S. No. 2(b) of Notification No. 12/2017 – Central Tax (Rate),, Advocate has the same meaning as assigned to it in clause (a) of sub-section (1) of section 2 of the Advocates Act, 1961 (25 of 1961). As per section 2 of Advocates Act, 1961, Advocate means an advocate entered in any roll under the provisions of this Act.

c. Senior Advocate – As per S. No. 2(zzd) of Notification No. 12/2017 – Central Tax (Rate),, Senior Advocate has the same meaning as assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961). As per section 16(2) of Advocates Act, 1961, An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High court is of opinion that by virtue of his ability, [standing at the Bar or special knowledge or experience in law] he is deserving of such distinction.

d. Taxable Territory – As per section 2(109) of the CGST Act, taxable territory means the territory to which the provisions of this Act apply and as section 1(2) of the CGST Act, this Act extends to whole of India. Therefore, taxable territory means whole of India.

2. Registration

a. As per S. No. 2 of N/N 13/2017 – Central Tax (Rate) dated 28.06.2017 read with corrigendum dated 25.09.2017, Services provided by an individual advocate including a senior advocate or firm of advocates [“Advocates”] by way of legal services, directly or indirectly to any business entity located in the taxable territory, the whole of central tax leviable u/s 9 of the CGST Act [“Act”], shall be paid on reverse charge basis by the recipient of the such services.

b. As per N/N 5/2017 – Central Tax dated 19.06.2017, persons only engaged in making supplies of taxable goods or services or both specified under N/N 13/2017 – Central Tax (Rate) dated 28.06.2017 the whole of central tax shall be paid on reverse charge basis by the recipient of such goods or services or both u/s 9(3) of CGST Act as the category of persons exempted from obtaining registration under the Act.

c. As per section 23(a) of the CGST Act, any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act are not liable for registration.

d. Crux

i. As per the above two notifications and section 23, if the Advocates engaged in only providing legal services to any business entity having turnover upto Rs. 20 lakhs in a preceding financial year located in the taxable territory, then they are not liable for registration under the Act.

ii. If the Advocates also engaged in various services which are not covered under the definition of legal services as mentioned above, then they are liable for registration under the CGST Act.

iii. If the Advocates also taking services from outside India and the services are covered under the definition of Import of Service as defined in section 2(11) of the IGST Act, then they are liable to pay GST under RCM and therefore they are liable for registration u/s 24 of the Act irrespective of the turnover threshold.

iv. If the Advocates are also providing legal services outside India which are outside the definition of taxable territory, then irrespective of whether or not they are covered under the definition of Export of Service as defined u/s 2(6) of the IGST Act, then they are also liable for registration under the Act.

3. Taxability of Services

a. Export of Service – If the partnership firm of advocates or an advocate including senior advocate provides legal services satisfying the conditions of Export of Service specified in section 2(6) of the IGST Act, then they are treated as zero rated supply u/s 16 of the IGST Act and they are eligible to claim refund of unutilized Input tax Credit u/s 54(3) of the CGST Act provided that conditions of section 16(3) of IGST Act has been satisfied.

b. Exempt Services [Notification No. 12/2017 – Central Tax (Rate) and N/N – 9/2017 – Integrated Tax (Rate)]

i. Services provided by a partnership firm of advocates or an individual as an advocate other than a senior advocate by way of legal services to –

a. An advocate or partnership firm providing legal services;

b. Any person other than business entity; or

c. A business entity with an aggregate turnover upto Rs. 20 lakhs (Rs. 10 lakhs in the case of special category states) in the preceding financial year.

d. Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity [N/N 02/2018 dated 25.01.2018].

ii. Services provided by a senior advocate by way of legal services to –

a. Any person other than a business entity; or

b. A business entity with an aggregate turnover upto Rs. 20 lakhs (Rs. 10 lakhs in the case of special category states) in the preceding financial year.

c. Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity [N/N 02/2018 dated 25.01.2018].

c. Services liable to Reverse Charge Mechanism [RCM] [N/N 13/2017 – Central Tax (Rate) dated 28.06.2017 and N/N – 10/2017 – Integrated Tax (Rate)]

i. Services provided by an individual advocate including senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity having turnover more than Rs. 20 lakhs (Rs. 10 lakhs in the case of special category states) in the preceding financial year 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.