It is widely assumed that individual Advocates and law firms, are exempt from the GST on legal services. However, the question of whether GST applies to lawyers, legal firms, and their services remains unanswered.
When an Advocate or a law firm provides any type of legal service to a commercial entity with an aggregate turnover of Rs. 20 lakhs or more in the previous financial year, the Advocate or law firm is subject to GST. When a senior advocate gives legal services to another advocate or firm of advocates, GST on legal services is also charged.
The taxation of legal services has remained unchanged since the establishment of the GST Law. It does not apply to Advocates or law firms on either the reverse or forward charge. The Central Goods and Service Tax Act, 2017 (“CGST Act”) was enacted, along with other GST legislations, to combine all indirect taxes into a single levy.
Categories of services on which tax will be payable under reverse charge mechanism (RCM) under CGST Act:
SI. No. 2 Notification No. 13/2017- Central Tax (Rate) dated June 28, 2017 (“RCM Notification”)
| Sl. No. | Category of Supply of Services | Supplier of service | Recipient of Service |
| 2 | Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly.
Explanation.- “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. |
An individual advocate including a senior advocate or firm of advocates. | Any business entity located in the taxable territory. |
Explanation.- For purpose of this notification,-
………………
“(c) the business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services for the purpose of this notification.”
GST rates and HSN or SAC codes for Advocates, Senior Advocates & Firm of Advocates
| SAC | Description of service | SGST | CGST | IGST |
| 9982 | Legal and accounting services | 9% | 9% | 18% |
Exemption available for Advocates:
Sl. No 45 of the Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017 (“Exemption Notification”):
| S. No. | Heading | Description of services | Rate | Condition |
| “45 | Heading 9982 or Heading 9991 | Services provided by-
(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; or (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); (iv) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity; (c) a senior advocate by way of legal services to- (i) any person other than a business entity; or (ii) 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). (iii) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity.” |
Nil | Nil |
Defintion 2(zm) of the Exemption Notification:
“(zm) “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;”
Below are the exemptions available to Advocates if provided to:
- Individual advocate or firm of advocates
- Senior advocate
- To a business entity who is eligible for exemption from registration under the CGST Act
- Non-business entity
- To any government entity
Judgments:
Practicing advocates exempted from service tax/GST
The Hon’ble Orissa High Court in Devi Prasad Tripathy v. the Principal Commissioner CGST and Central Excise [W.P.(C) No. 27727 of 2020, dated April 22, 2021] quashed the notice demanding to pay service tax/GST issued to the advocates. Held that, practicing advocates should not have to face harassment on account of the Revenue Department issuing notices calling upon them to pay Service Tax/GST when they are exempted from doing so, and in the process also having to prove they are practicing Advocates.
The Court observed that, the Petitioner should have submitted “documentary evidence to prove his claim that he is a practicing individual lawyer and does not come under the provision of GST or service tax.” The Court also heard other advocates present in the Court who stated that they too have received such notices in this regard.
Bombay HC stayed the demand notice seeking Service Tax from Advocate: Further, the Hon’ble Bombay High Court in Sanjiv Madhusudan Shah v. Assistant Commissioner of Central and Service Tax & Ors. [Writ Petition (L) No. 646 of 2021, dated January 12, 2021] had stayed a demand notice issued, seeking to levy service tax upon an Advocate and issued notice to the Revenue Department for seeking response in the matter. Considered the Petitioner’s submission that, the Central Government has issued several exemption notifications whereby services provided by an individual as an advocate or as a partnership firm of advocates by way of legal services are exempt from the charge of service tax. Further, there is a provision for recovering service tax from the service recipient and ignoring the same, the show cause cum demand notice has been issued mechanically. However, the petition was disposed as withdrawn on April 20, 2021.
Conclusion:
If the recipient is a business entity with an aggregate turnover upto threshold limit then legal service is exempt. Again the underlying service is exempt so no question of reverse charge. Therefore, if legal services are not exempt and the recipient is a business entity located in the taxable territory then the recipient shall get himself registered in GST to pay tax under reverse charge.
However, the service recipient i.e. the Client must pay GST under the RCM, which is the business entity, in the case of legal services, including representational services, rendered to a business entity by an advocate, including a senior advocate.
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i am and practicing Advocate do i have to pay service tax
Whether a charitable religious trust exempted u/s 12A of Income Tax, but registered under GST as a tax payer having turnover of 2CR in renting of immovable properties, will fall under ‘business entity’ and liable for RCM ?
As per the understanding only a business entity with an aggregate turnover up to such amount in the preceding financial year (i.e. INR 20 Lakhs) as makes it eligible for exemption from registration under the Central Goods and Services Tax Act.
In your case the trust is already registered under the GST, hence the same is to be considered as the business entity under the CGST Act. Thus, liable to RCM.
Further, the same also depends on whether such activities of the trust is covered under the term ‘charitable activities’ or not.