GST on Legal Services

Legal services relate to services provided by Advocates and Lawyers in relation to advice, consultancy or assistance in any branch of law or representational services before any court. Legal services enjoy special treatment under the GST. In this article, we look at the applicability of GST on legal services in detail. SAC Code for Legal Services.

Legal Services

Definition of legal services has been provided under entry 2 (zm) of notification no. 12/2017 – Central tax (rate) dated 28.06.2017 which is reproduced hereunder: “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”.

GST on Legal Services

The Government vide notification 12/2017 – Central Tax (Rate) dated 28.06.2017, has provided that GST would be applicable on reverse charge basis for the following services:

A partnership firm of advocates or an individual as an advocate, other than a senior advocate, by way of legal services to –
1. An advocate or partnership firm of advocates providing legal services;
2. Any person other than a business entities;
3. A business entity with an aggregate turnover up to INR 20,00,000/- (INR 10,00,000 in case of special category states) in the preceding financial year.
A senior advocate by way of legal services to:
1. Any person other than a business entities;
2. A business entity with an aggregate turnover up to INR 20,00,000/- (INR 10,00,000 in case of special category states) in the preceding financial year.

In the above context, the meaning of term ‘advocate’, 'senior advocate' and ‘business entity’ are important:

Advocate

The definition of Advocate states “advocate means an advocate entered in any roll under the provisions of this Act”.

Senior Advocate

The definition of Senior Advocate states: There shall be two classes of advocates, namely, senior advocates and other advocates. 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. (3) Senior advocates shall, in the matter of their practice, be subject to such restrictions as the Bar Council of India may, in the interest of the legal profession, prescribe. (4) An advocate of the Supreme Court who was a senior advocate of that Court immediately before the appointed day shall, for the purposes of this section, be deemed to be a senior advocate.

Business Entity

The notification states that business entity means any person carrying out business.

Applicability of GST on Legal Services

Sr. no. 2 of Notification 13/2017-Central Tax (Rate) contains provisions of reverse charge mechanism under legal services, however the said sr. no. 2 was replaced, vide corrigendum to notification 13/2017-Central Tax (Rate), issued on 25.09.2017 and the provisions are as under:

Supply of services	Supplier	Recipient
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 service before any court, tribunal or authority”	An individual advocate including a senior advocate or firm of advocate	Any business entity located in the taxable territory

Above provisions clearly states that when legal services are provided by an individual advocate (including senior advocate) or firm of advocates to a business entity, than in such case, under reverse charge mechanism, GST is payable by business entity on such transaction. Finally, the applicability of GST on legal services can be summarised as under:

Service Providers	Service Recipient	Taxability
Firm or individual advocates providing legal service	Firm or individual advocates providing legal service	Exempted vide notification no. 12/2017
Firm or individual advocates providing legal service	Any person other than business entities	Exempted vide notification no. 12/2017
Firm or individual advocates providing legal service	Business entities having turnover up to INR 20,00,000 (or INR 10,00,000 in some case)	Exempted vide notification no. 12/2017
Firm or individual advocates providing legal service	Business entities having turnover above INR 20,00,000 (or INR 10,00,000 in some case)	Tax payable under Reverse Charge Mechanism
Senior advocate providing legal service	Any person other than business entities	Exempted vide notification no. 12/2017
Senior advocate providing legal service	Business entities having turnover up to INR 20,00,000 (or INR 10,00,000 in some case)	Exempted vide notification no. 12/2017
Senior advocate providing legal service	Business entities having turnover above INR 20,00,000 (or INR 10,00,000 in some case)	Tax payable under Reverse Charge Mechanism