Let us discuss in Frequently Answered Questions (FAQ) format for more clarity and understanding: –
1. Who is an advocate and Senior Advocate?
“Advocate” means an advocate entered in any roll under the provisions of this Act (Section 2 (a) of Advocates Act,1961) and “Roll” means a roll of advocates prepared and maintained under this Act. (Section 2 (k) of Advocates Act,1961)
Advocate on roll in India means advocate whose name is entered in register of advocate prepared by Bar Councils. In case of Foreign lawyers, they are not to be treated as an advocate in India as they are not on roll of advocates of any bar councils in India.
As per section 16 of Advocates Act 1961, Senior Advocate is an advocate for whom Supreme Court or High Court is of the opinion that by virtue of his ability or standing at Bar or special knowledge or experience in law and he is deserving of such distinction.
2. What are legal services?
As per Notification 12/2017 – Central Tax (Rate) dated 28th June,2017 – “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;”
Advocates provides services in the areas of compliances, advisory and litigation per-se.
3. Is it a taxable supply?
To check taxability, first to check whether sale or services covers under definition of supply or not. Legal services cover under definition of supply under section 7 of CGST ACT, 2017. For levy of tax, one must look Section 9 of the CGST Act,2017. It empowers government to issue notification to covers Services or Goods or both, where tax is to be paid by recipient under RCM.
Advocate services bring into ambit of Reverse Charge Mechanism vide Notification No. 13/2017 – Central Tax (Rate) dated 28th June, 2017. Entry No. 2 of the notification (updated by Corrigendum dated 25th September,2017) is: –
“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.”.
4. What are the GST exemptions available to advocates?
Entry No. 45 of Notification 12/2017 – Central Tax (Rate) dated 28th June,2017 exempt services provided by: –
a) A senior advocate by way of legal services to any person other than business entity or a business entity with an aggregate turnover upto Rs. 20 Lakhs in the preceding FY.
b) A firm of advocates or an individual advocate other than a senior advocate, by way of legal services to an advocate or firm of advocates, other than business entity or a business entity with an aggregate turnover upto Rs. 20 Lakhs in the preceding FY.
In Crux, Legal Services by advocates or advocates firm to non-business entities, small business entities (turnover less than 20 lakhs) and to advocates or advocate firm is exempt. But services provided by senior advocates to advocate firms or advocate requires suitable clarification from government whether these are exempt or not , as per notification wordings these are taxable.
5. What is position of taxability in case of services provided by Senior Advocates?
By clarification F. No. 354/107/2017-TRU, in has been clarified by government that legal services including representational services provided by an advocate including a senior advocate to a business entity is taxable under RCM, i.e. business entity has to pay tax under RCM.
As mentioned in point above, if the senior advocate provides services to advocate or advocate firm, services are not exempt.
6. Is GST registration mandatory for advocates?
As per Notification No. 5/2017 – Central Tax dated 19th June, 2017, registration requirement is exempt if supplies are wholly covered under Reverse Charge Mechanism (RCM). However, if the advocate or advocate firm has any other taxable income and aggregate turnover exceeds Rs. 20 lakhs than it is required to take registration in GST. Its pertinent to note that for calculation of Rs. 20 Lakhs limit, all kind of supplies taxable, interstate, exempt, export, RCM output, Nil rated to be clubbed.
7. What is position in case of Export of Legal Services?
As per Notification No. 13/2017 – Central Tax (Rate) dated 28th June, 2017, RCM is applicable on legal services provided to Business Entity. In case services are provided outside India, then RCM is not applicable as the Business Entity is located outside taxable territory.
In case of legal services, services provided outside India qualifies as Export of Services provided all conditions are fulfilled. Hence, RCM is not applicable. Notification No. 5/2017 – Central Tax dated 19th June, 2017, will not be applicable, in full since the Export of Services are not under the ambit of RCM. Export of Services is considered as inter-state transactions; therefore Section 24 of CGST Act will be applicable and registration is mandatory if turnover exceeds Rs. 20 Lakhs
For Export of services, Export procedures under GST must be followed. In pursuance to Notification No. 16/2017 read with Circular No. 8/8/2017, export can be done in two ways either on payment of IGST on export supplies or file Letter of Undertaking.
As per rule 96A of CGST Rules, 2017, the foreign inward remittances must be received within one year from the date of invoice. In case remittance is not received within the prescribed time then exporter has to deposit IGST from his own pocket, which is 18% of such supplies.
8. What is the taxability of Import of Legal Services?
Usually advocates engages foreign advocates to serve their client located abroad. Foreign advocate bills to Indian advocates / advocate firm. Services supplied by foreign advocate can not enjoy exemption of Notification 12/2017 – Central Tax (Rate) dated 28th June,2017 as the foreign advocate is not on roll of bar council of India and hence their supplies are taxable under RCM in the hands of service receiver.
9. How advocates can avail the Input Tax Credit?
Input Tax credit cannot be availed in case of Legal services provided in India as the output supplies are taxable at recipient end under RCM.
As per Section 16 of IGST Act, 2017, exports are zero-rated supplies and Input Tax credit can be availed in relation to export of services. Such Input Tax would be refunded to the taxpayer.
10. What is Tax Rate? When is it taxable under Reverse Charge Mechanism and Forward Charge Mechanism?
Tax Rate on Advocate Services is 18%.
Analysis Table of GST Taxability under Reverse Charge (RCM) and Forward Charge (FCM) is as below: –
| Service Provider | Nature of Service | Service Receiver | Taxability | Notification |
|
Senior Advocate |
Legal Services |
Senior Advocate | Yes, FCM |
Notification 12/2017 – Central Tax (Rate) dated 28th June,2017 and Notification No. 13/2017 – Central Tax (Rate) dated 28th June, 2017 |
| Advocate | Yes, FCM | |||
| Firm of Advocates | Yes, FCM | |||
| Non – Business Entity | Exempt | |||
| Small Business Entity (Turnover less than 20 Lakhs) | Exempt | |||
| Business Entity having turnover more than Rs. 20 Lakhs | Yes, RCM | |||
|
Firm of advocates or an individual advocate |
Legal Services |
Senior Advocate | Exempt |
Notification 12/2017 – Central Tax (Rate) dated 28th June,2017 and Notification No. 13/2017 – Central Tax (Rate) dated 28th June, 2017 |
| Individual Advocate | Exempt | |||
| Firm of Advocates | Exempt | |||
| Non – Business Entity | Exempt | |||
| Small Business Entity (Turnover less than 20 Lakhs) | Exempt | |||
| Business Entity having turnover more Rs. 20 Lakhs | Yes, RCM |
11. What is taxability on reimbursement of expenses charged by advocates?
Taxability of reimbursement of expenses depends on nature of expenses incurred for provision of services by advocates. If these kinds of expenses are in nature of Pure Agent than tax need not to be paid otherwise these are taxable. For e.g., Advocate paid legal fees to Government on behalf of client and charge client on actuals, then GST not to be paid by client being all conditions of Pure Agent is fulfilled. But if in the same case, if there is mark-up in expenses, then GST is to be paid. However, in case of expenses other than nature of pure agent, GST is to be paid.
Important Points
1. Law firm registered other than individual or firm of advocates i.e., legal corporate entities, provisions of notifications referred above is not applicable.
2. Refund of Input Tax Credit or IGST paid on export supplies can be claimed.
3. It’s advisable that on services provided outside India, advocates must follow export procedures to avoid any dispute in future.
4. Services other than legal services provided by advocates / advocate firms are taxable as per normal provisions of GST Act.
5. There is an issue of ‘Excess Tax’ in advocate services as they are not entitled to get the benefit of Input Taxes paid on output domestic supplies reason being the supplies are taxable under RCM. Input taxes become part of cost and charge to client, on which client again pay tax under RCM. It results in ‘Tax on Tax’ i.e. tax on the tax embedded in the cost to client.
6. Advocates / Advocate firms must mention on bottom of their invoice that taxes are to be paid by service receiver under RCM
7. JK Mittal case – In pursuance of Mr. J K Mittal Delhi High Court case, government clarify that legal services are taxable under RCM. But still in case of services provided by senior advocates to advocates / advocate firms, suitable clarification is much awaited for exemption.
For any clarification or discussion, feel free to mail me at [email protected]
(Republished with Amendments)
Author Bio
I pay GST on a regular basis. Need advice on a tropic where a vendor requests a GST payment receipt before releasing it, in order to protect themselves as defaulters. How will they be defaulters? Unknown to me, if I do not pay my GST payment on time after receiving it, I will be considered a defaulter; it is my responsibility to pay the tax on time after receiving it. Why should I pay the GST amount out of my own pocket before receiving it?
Request solution to the problem listed below, citing the relevant section(s) of the GST Act.
(1) Do vendors have the right to deduct and hold GST payments when releasing payment of any Tax Invoice?
(2) When the party is a private limited company and registered GST user and the Vendor is not eligible to claim any ITC from the raised Tax Invoice, does the vendor have the right to request a GST payment receipt before releasing the GST amount deducted from the Tax Invoice? please let me know. Thanks.
If any URD firm having exempted supply turnover of more than 20 Lacs, receives Legal Services from any Advocate, whether firm is liable to take GST Registration & pay RCM on legal services
If the Business Entity is registered under GST with Turnover less than 20 lakhs and it avails services of an Individual Advocate, is it supposed to pay GST under RCM?
Sir I want GST no for new bussiness from home pls cont me tnx
I am an advocate and I prepare and file GST, TDS, Income tax & VAT returns. I am member of District Bar Council. My annual turnover is less than 20 Lakh. My clients say you are professional and we would not take your services if you do not give us bill including GST.
1. Should I register my self in GST?
2. If I get register my self in GST, then my clients have to deposit RCM or not on my bill which is including GST?
Where a firm of Advocates provides services in out of india, but paid to commission on urp. it is liable to GST RCM.
please suggestion
Where a firm of Advocates provides services in out of india, but paid to commission on urp. it is liable to GST RCM
When a law firm has 2 partners, one being an advocate and other being a non-advocate, then is GST exemption applicable to the law firm.?
Further, will it be called a law firm or a law corporate entity ?
If banks pay legal services to adv or registrar drt, whether Input Tax Credit is allowed?
Super Article. Very informative and detailed explanation in simple language. Good work. Appreciate !!!
998213 Legal documentation and certification services concerning patents, I was got the Invoice for above service, so how much % RCM , was need to pay from side
In case banks pay legal fees to advocates and debit the account of borrowers, whether GST is payable by banks under RCM?
Is get applicable to advocate clerks?
Is get applicable to law clerks or advocate clerks?
If A Company has paid Legal Fees to an Advocate on behalf of B Company and RCM Liability also paid and ITC taken by A Company. Later A Company wants to reimburse the Legal Fees paid from B Company. Is there any GST implication there?
With ref to point no. 4, in case of a new company advocate services will be exempted irrespective of the current year turnover?
Is there any advocate who looks in GST court matter
Please call me or give me your contact number
: 8920216310
I am an individual advocate who provide legal advice and legal services to companies registered under Gst
I have lost lot of work as I have not registered myself with GST, companies have urged to work with gst registered law firms than individual advocate not registered with Gst
What is the procedures for an individual advocate to get registered with Gst? Whose yearly turnover is less than 1.6 lakhs ?
.
Where a firm of Advocates provides services in India to a recipient located out side India and foreign recipient will not pat any taxes in India on its own ,Who is liable to Charge/pay GST?
Will this be considered as export of service and No GST will be applicable or the Advocate Firms are directly exempt to pay GST
In the table provided above for gst applicability of firm of advocate or individual advocate–the table says business entity turnover > Rs 20Lakhs= Exempt
it should be: business entity turnover </= Rs 20Lakhs= Exempt (as upto 20lakh T.O is exempt)
Yes ,it should be < /= 20 lakhs for Business entity under the "Taxability" column in Respect of the Senior Advocate and Firm of Advocates and Individuals .
Please correct me if I am wrong.
Business Entity 20 Lakhs, RCM
Dear Sir,
We received Labour Law Advocate Service 1300 Per Month . would we pay RCM. He is not provide Tax invoice against Services.
first we must have clear between advocate and lawyer concept.
in gst law only the advocate and his services is quoted so first thing is he must be a advocate and second is he providing services related to branch of laws only then exemption is available.
if NHAI is taking advocate services from a individual advocate, then is NHAI required to pay gst under RCM? or it will be exempt?
NHAI is liable to pay gst on rcm basis.
Nice article
C.A Is Given the bill of Aduit fess with gst 18%
can we take the input of the taxes in gst
waiting for repaly
Yes, there is no restriction for ITC in Sec 17(5) of cgst act 2017.
You can go for ITC but if you doing some exempt business then ITC will be available only as per rule 42
if an individual advocate provide an service to business entity turnover exceed 20,00,000. he is chargable to gst under RCM.
Is an advocate require to take gst registration if his gross receipts exceed 20,00,000 by supply of services charged under RCM
Please reply.
Hi,
if an advocate provided services from Delhi to Registered person (Business entity having turnover more than Rs. 20,00,000) situated in Noida (UP). then, in such case for such registered person under RCM which tax has to pay whether IGST or CGST & SGST ?
GST paid by business entity on advocate fee is eligible for ITC or not ?
yes
WE HIRE ADVOCATE FOR SALES TAX AND GST CONSULTANCY. THE AMOUNT PAID TO HIM UNDER RCM OF GST OR NOT
if he is registered in any bar council/other platform only then his services is exempt. in other case he is subject to gst
GIVE ANY SIMPLE MATTER TO THE BUREAUCRATS OF iNDIA AND THEY WILL MAKE THE SIMPLE ISSUE FULL OF COMPLEXITIES FOLLOWED BY CLARIFICATIONS WHICH ARE AGAIN FULL OF CONFUSION AND THEREFORE AMENDMENTS AND FINALLY SETTLED BY THE COURT
I think your comment in the Analysis table, pertaining to services supplied,being other than representational service, by a Senior advocate to another senior advocate or advocate shall fall under FCM, needs to be reviewed. (Notification number 13/2017 is for RCM).
NICE EXPLANATION.