In this case Delhi High Court held that as of date there is no clarity on whether all legal services (not restricted to representational services) provided by legal practitioners and firms would be governed by the reverse charge mechanism.
If in fact all legal services are to be governed by the reverse charge mechanism than there would be no purpose in requiring legal practitioners and law firms to compulsorily get registered under the CGST, IGST and/or DGST Acts.
Those seeking voluntary registration would anyway avail of the facility under Section 25 (3) of the CGST Act (and the corresponding provision of the other two statutes).
There is therefore prima facie merit in the contention of Mr Mittal that the legal practitioners are under a genuine doubt whether they require to get themselves registered under the three statutes.
In the circumstances, the Court directs that no coercive action be taken against any lawyer or law firms for non-compliance with any legal requirement under the CGST Act, the IGST Act or the DGST Act till a clarification is issued by the Central Government and the GNCTD and till further orders in that regard by this Court.
Detailed Discussion is as follows :-
1. This petition is by J. K. Mittal & Company, which is a proprietary concern of which Mr. J. K. Mittal, Advocate, who appears in person, is the Sole Proprietor. The Petitioner states that he provides legal services including consultancy, opinion, drafting, appearances before Courts etc. Mr. Mittal states that although he has an office only in Delhi, he represents his clients throughout the country before various High Courts and Tribunals outside Delhi.
2. The grievance of the Petitioner is that contrary to the recommendations of the GST Council (Respondent No. 3) at its 14th meeting held on 19th May, 2017 and 16th meeting held on 11th June 2017, Notification No. 13/2017-Central Tax (Rate) dated 28th June, 2017 as well as Notification No. 13/2017-State Tax (Rate) dated 30th June, 2017, have been issued respectively, by the Union of India (Respondent No. 1) and the GNCTD (Respondent No. 2), which are per se in violation of the Central Goods and Service Tax Act 2017 (CGST Act), the Delhi Goods and Service Tax Act 2017 (DGST Act) read with Article 279 A of the Constitution of India and have adverse consequences to lawyers in general including himself; Accordingly, in this petition the constitutional validity of the aforesaid notifications is challenged.
3. In addition, the petition also challenges Notification No.5/2017-Central tax dated 19th June, 2017 issued by the Union of India and Notification No. F3(10)/Fin(Rev-I)/2017-18/DS-VI/340 dated 22nd June, 2017 issue by the GNCTD essentially on the ground that these notifications are contrary to the recommendations of GST Council. The petition also challenges the constitutional validity of Section 9 (4) of CGST Act, Section 5(4) of The Integrated Goods and Services Tax Act, 2017 (IGST Act) and Section 9 (4) of DGST Act. He points out that this provision was not to be found in the model laws prepared by the GST Council. It seeks to collect GST on `reverse charge’ basis from a person registered under the CGST Act, IGST Act or DGST Act in respect of goods supplied and services received by such person from a person who has not been so registered. Mr Mittal submits that this provision lacks a proper corresponding machinery provision to facilitate its implementation, and is therefore ultra vires the statute. According to him this provision is incapable of being complied with and is bound to cause undue hardship to the persons registered under the aforementioned three statutes.
4. In addition the above main points of challenge, in support of his plea for urgent interim relief Mr Mittal submits that under Article 279 A of the Constitution of India, the GST Council is a constitutional body. Article 279 A (4) (c) of the Constitution of India states that the GST Council “shall make recommendations to the Union and the States on the model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax…” Consistent with this requirement a number of provisions of the CGST Act including Section 9 (1), 9 (2), 9 (3) and 9 (5) envisage notifications being issued by the central government “on the recommendations of the Council.” The categorical averment is that the impugned notifications are in violation of this mandatory statutory requirement inasmuch as the GST Council had recommended that legal services as a whole would be amenable to GST only on ‘reverse charge’ basis. To make good this assertion, Mr. Mittal draws the attention of the Court to the document titled “SERVICES UNDER REVERSE CHARGE AS APPROVED BY GST COUNCIL”. Row 3 of this chart reads as under:-
“SERVICES UNDER REVERSE CHARGE AS APPROVED BY GST COUNCIL
The fitment of rates of services were discussed on 19 May 2017 during the 14th GST Council meeting held at Srinagar, Jammu & Kashmir. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28%. The list of services that will be under reverse charge as proved by the GST Council is given below. The information is being uploaded immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes. The decisions of the GST Council are being communicated for general information and will be given effect to through gazette notifications which shall have force of law.
