{"id":56624,"date":"2023-05-16T16:12:17","date_gmt":"2023-05-16T10:42:17","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=56624"},"modified":"2023-05-16T16:12:18","modified_gmt":"2023-05-16T10:42:18","slug":"gst-on-legal-services-applicability-and-gst-rates","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/","title":{"rendered":"GST on legal services: Applicability and GST Rates"},"content":{"rendered":"\n<p>Legal services rendered by an individual attorney, a law company, or senior attorneys are subject to an 18 per cent tax under the Central Goods and Services Tax Act. Legal services refer to products and services offered by Advocates and Lawyers in regard to consultation, advice, or help in any area of law, as well as representative services in front of any court. Under the GST, legal services are given particular consideration.<\/p>\n\n\n\n<ul><li>Legal services are defined under the\nnotification number&#8217;s entry 2 (zm). 12\/2017 &#8211; Central tax (rate), dated June\n28, 2017, which is reproduced below:<\/li><li>Legal services include representational services\nbefore any court, tribunal, or authority and encompass any service related to\nguidance, consultancy, or help in any area of law in any way.<\/li><\/ul>\n\n\n\n<p>Many of us have taken some legal aid but have you ever\nthought about the GST levied on it? Through this article, the author will\nelaborate on the procedure of GST on legal services that have been amended in\nthe Indian indirect taxation system. Read on to learn more about the\napplicability, exemption, and GST rate on legal services offered by an\nadvocate(s) or law firm(s) in India. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Applicability_of_GST_on_legal_services\" >Applicability of GST on legal services<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Meaning_of_Advocate_Senior_Advocate_and_business_entity\" >Meaning of Advocate, Senior Advocate and business entity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Legal_fees_and_services_under_the_subject_to_GST\" >Legal fees and services under the\nsubject to GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Meaning_of_Reverse_Charge_Mechanism_RCM_under_GST_law\" >Meaning of Reverse Charge Mechanism (RCM) under GST law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Latest_Update\" >Latest Update<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#GST_on_RCM\" >GST on RCM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/gst-on-legal-services-applicability-and-gst-rates\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Applicability_of_GST_on_legal_services\"><\/span><strong>Applicability of GST on legal services<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any legal services\nprovided by a lawyer or law firm to a company with annual aggregate revenue of\nat least 20 lakhs of Indian rupees are subject to a GST charge. GST on legal\nservices provided by a senior advocate to another advocate or firm of advocates\nmust also be paid.<\/p>\n\n\n\n<ul><li>Since the passage of the GST law, the taxation of legal services has remained constant. Attorneys and law firms are exempt from the reverse charges.<\/li><li>All indirect taxes have been consolidated into a single levy under the C<strong>entral Goods and Service Tax Act of 2017 (CGST Act)<\/strong><sup><a href=\"https:\/\/www.indiacode.nic.in\/handle\/123456789\/15689?sam_handle=123456789\/1362\"><strong>[1]<\/strong><\/a><\/sup><strong> <\/strong>and other GST laws.<\/li><li>Section 7 of the CGST Act deals with charges when the term &#8220;supply&#8221; is considered to include all forms of supplying goods or services in exchange for money or both in order to further a business.<\/li><li>Article 279A of the Indian Constitution states that the GST Council determines the tax rate for legal fees for legal services. Exclusions from the prior system were carried over.<\/li><\/ul>\n\n\n\n<p>Businesses operating\nin general category states, such as the Northeast, that generate up to INR 20\nlakh or INR 10 lakh in revenue are exempt from paying taxes.<\/p>\n\n\n\n<p>Numerous changes\nhave taken place since the government introduced the GST in July 2017. For\nlegal services subject to GST on legal services, senior advocates are listed in\na separate category on the reverse charge list. They fall under the category of\nservices for reverse charges.<\/p>\n\n\n\n<p>Under the Reverse\nCharge provision (RCM) of the GST laws, all legal services, whether offered by\na law firm or an individual, are liable for payment. Since all of them would be\nexempted from GST application for legal services, no other output produced by\nlaw firms or attorneys who offer legal services is subject to GST liability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Advocate_Senior_Advocate_and_business_entity\"><\/span>Meaning of Advocate, Senior Advocate and business entity<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Understanding what the terms\n&#8220;advocate,&#8221; &#8220;senior advocate,&#8221; and &#8220;business\nentity&#8221; imply in the context as mentioned earlier is crucial:<\/p>\n\n\n\n<ul><li>Advocate<\/li><\/ul>\n\n\n\n<p><strong>The definition of <\/strong>Advocate states:<\/p>\n\n\n\n<p>&nbsp;The term has been\ndefined under <em>Section 2(1)(a)<\/em>; the\nprovision says that &#8216;An advocate is someone who has entered in any roll under\nthe provisions of this Act.&#8217;<\/p>\n\n\n\n<ul><li>Senior Advocate<\/li><\/ul>\n\n\n\n<p><strong>The definition of Senior Advocate states:<\/strong><strong><\/strong><\/p>\n\n\n\n<p>There are two kinds of advocates: senior and other\nadvocates. If the Supreme Court or a High Court determines that an advocate\nmerits such distinction due to his ability to stand at the Bar or unique\nknowledge or expertise in law, the designation of senior Advocate may be made\nwith the Advocate&#8217;s assent. Senior solicitors must abide by any limitations on\ntheir practice that the Bar Council of India may impose in the best interests\nof the legal community. For this section, a Supreme Court attorney who was a\nsenior attorney before the designated day is considered a senior attorney.<\/p>\n\n\n\n<ul><li>Business Entity<\/li><\/ul>\n\n\n\n<p>The notification states that a business entity means any\nperson carrying out business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Legal_fees_and_services_under_the_subject_to_GST\"><\/span><strong>Legal fees and services under the\nsubject to GST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As of June 28, 2017, the following legal\nservices are defined under entry 2 (zm) of notification no. 12\/2017 &#8211; Central\ntax (rate): Legal services include representational services before any court,\ntribunal, or authority and include any services linked to advising, consulting,\nor help in any area of law, in any way.\u201d<\/p>\n\n\n\n<p>Furthermore, it is stated that notification\nNo. 13\/2017-Central Tax (Rate), dated June 28, 2017 (Serial No. 2), is\napplicable. For example, it states that the following services fall under the\npurview of the reverse charge mechanism: <\/p>\n\n\n\n<p>&#8220;Services supplied by an individual\nadvocate(s), or a senior advocate(s), by way of representational services\nbefore any Court of Law, Tribunal, or Authority in India, directly or\nindirectly, to any business entity located in the taxable territory of India. <\/p>\n\n\n\n<p>The objective was to adapt the indirect tax\nsystem to all areas of economic activity. Legal services that were taxable and\ncame into the &#8220;legal consultancy services&#8221; category were subject to\nservice tax.<\/p>\n\n\n\n<p>The service tax law put into effect the\nNegative List Regime in 2012. Any legal services rendered by an individual or a\nlaw firm are expressly exempt from the GST by the government. However, when the\nlevy is applied on a reverse charge basis, there is no exemption from the\nrequirement to pay service tax. Alternatively put, the customer or service user\nwas in charge.<\/p>\n\n\n\n<p>Thus, no registration was required for lawyers\nand law offices back then. However, the GST on law firms and on all the legal\nservices must follow the 2017 GST system, which was recently established.<\/p>\n\n\n\n<p>Does that indicate that lawyers who work for\nbusinesses rather than legal firms must follow the rules of the reverse charge\nmechanism? A person must pay GST even if they are not currently practising law.<\/p>\n\n\n\n<p>Previously, neither service providers nor\nrecipients were required to pay taxes. If you hired a non-attorney to perform\nsimilar services, it was taxed. However, attorney and law firm fees are subject\nto GST, even though they are exempt from paying it. <\/p>\n\n\n\n<p>Therefore it is required by a lawyers to first obtain <strong><a href=\"https:\/\/corpbiz.io\/gst-registration\">GST registration<\/a><\/strong> before beginning a private practice or acting for themselves. Currently, the GST does not necessitate the registration of legal professions. Furthermore, since all taxes combine into one, you are exempt from paying professional taxes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Reverse_Charge_Mechanism_RCM_under_GST_law\"><\/span>Meaning of Reverse Charge Mechanism (RCM) under GST law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Reverse Charge\nMechanism (RCM) is a procedure that allows the recipient to pay the GST rather\nthan the supplier. In this instance, the recipient\/receiver, instead of the\nsupplier, is responsible for paying the tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Latest_Update\"><\/span>Latest Update<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><strong>19th December 2022<\/strong><\/li><\/ul>\n\n\n\n<p>The Karnataka GST AAR\nreleased the decision for M\/s Yaadvi Scientific Solutions Private Limited. It\nwas determined that reimbursements for expenses incurred by employees on behalf\nof the organisation are not taxable under the GST Act 2017 since they fall\nunder Schedule II. <\/p>\n\n\n\n<ul><li><strong>09th December 2022<\/strong><\/li><\/ul>\n\n\n\n<p><strong>GST AAR:<\/strong>&nbsp;RCM is not applicable to director\nreimbursements for costs incurred on the company&#8217;s behalf.<\/p>\n\n\n\n<p>The statement\n&#8220;Ignore prompt on liability for inward supplies attracting reverse charge\nin Table-3.1(d).&#8221;&nbsp;<\/p>\n\n\n\n<p>&nbsp;In accordance\nwith the GST acts and revisions, the government has finally implemented the\nreverse charge mechanism as of February 01, 2019. Also, to note that the\nexemptions up to INR 5000 will be effectively eliminated.<\/p>\n\n\n\n<p><strong>In the following scenarios, the Reverse\nCharge Mechanism is applicable:<\/strong><\/p>\n\n\n\n<ul><li>Imports<\/li><li>Purchase\nfrom an unregistered dealer<\/li><li>Supply\nof notified goods and services<\/li><\/ul>\n\n\n\n<p>This flips the situation around because taxes must be paid by the person receiving the goods and services. A GST must be paid on behalf of the recipient if they are making purchases from unregistered sellers. The supplier needs to give the recipient a payment voucher. As per Section 2(94) of the CGST Act of 2017, the beneficiary must be registered.<\/p>\n\n\n\n<p>According to\nSection 2(98) of the CGST Act of 2017, a &#8220;Reverse-Charge&#8221; is when the\nrecipient of a supply of goods or services or both is responsible for paying\ntax rather than the supplier of such goods or services or both.<\/p>\n\n\n\n<p>As mentioned under\nsub-section (3) and sub-section (4) of Section 9 or<\/p>\n\n\n\n<p>under sub-section\n(3) and subsection (4) of Section 5 of the Integrated Goods and Services Tax\nAct of 2017.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_on_RCM\"><\/span><strong>GST on RCM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When an attorney or law firm enters into a\ncontract for legal services with another attorney or law firm, the RCM on legal\nservices is also in effect.<\/p>\n\n\n\n<p>In accordance with the &#8220;Goods and\nServices Tax and Legal Services&#8221; mechanism, the recipient is liable for\npaying the taxes owed as a result of the reverse charge. The GST on legal\nservices received by the client must be paid and deposited directly to the\ngovernment, per Section 9(3) of the Central Goods and Services Tax Act, 2017. <\/p>\n\n\n\n<p>Solicitors must first register to provide\nlegal services under the GST system&#8217;s reverse charge procedure. Similar to\nother service providers with an aggregate turnover of more than Rs. 20 lakhs,\nlegal service fees are subject to GST.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p> It is often believed that law firms and individual Advocates are exempt from the GST on legal services, but legal services rendered by an individual attorney, a law company, or senior attorneys are subject to an 18 per cent tax under the Central Goods and Services Tax Act. Legal services refer to products and services offered by Advocates and Lawyers in regard to consultation, advice, or help in any area of law, as well as representative services in front of any court.  <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/how-to-do-gst-registration-for-property-dealers\/\">How To Do GST Registration For Property Dealers?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Legal services rendered by an individual attorney, a law company, or senior attorneys are subject to an 18 per cent tax under the Central Goods and Services Tax Act. Legal services refer to products and services offered by Advocates and Lawyers in regard to consultation, advice, or help in any area of law, as well [&hellip;]<\/p>\n","protected":false},"author":48,"featured_media":56652,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[3467],"tags":[3618],"acf":{"service_id":"96"},"authorName":"Astitva Kumar","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image-27.jpg","authorDescription":"Astitva Kumar is an advocate by profession and has completed her BBA. LLB from IP University. She is an avid reader, researcher, and legal writer. Her areas of interest include mediation, conflict resolution, finance, cyber laws, and taxation.","postViews":5089,"readingTime":6,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56624"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/48"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=56624"}],"version-history":[{"count":6,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56624\/revisions"}],"predecessor-version":[{"id":56654,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/56624\/revisions\/56654"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/56652"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=56624"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=56624"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=56624"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}