Table of Contents
1. What do you mean by legal service?
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.
2. Will legal advice given by a chartered accountant be considered as legal services and taxable under reverse charge mechanism?
- Even though the advice given by a CA will be covered under the definition of legal services,
- RCM is applicable only when the service provider is an individual advocate or firm of advocates or arbitral tribunal.
3. Can the legal services provided by an advocate be taxed under the forward charge mechanism?
No, legal services provided by an advocate will be taxed in the hands of the service recipient under the reverse charge mechanism. (Refer FAQ no 4 for certain instances where forward charge is applicable)
4. Chargeability of legal services provided between advocates.
- Legal services provided by,
- individual advocate or firm of advocates other than senior advocate to individual advocate or firm of advocates other than senior advocate – EXEMPT from GST
- individual advocate or firm of advocates other than senior advocate to senior advocate – EXEMPT from GST
- Senior advocate to individual or firm of advocates – Taxable under forward charge (i.e. senior advocate to pay tax).
- Senior advocate to senior advocate – Taxable under forward charge
5. Who is liable to pay GST under RCM in case of legal services?
The service recipient being a business entity is liable to pay GST on a reverse charge basis.
6. Should all the business entities that receive legal services pay GST under RCM?
No, only those business entities with an aggregate turnover exceeding Rs. 20 lakhs (10 lakhs in the case of special category states) in the immediately preceding financial year is liable to pay GST under RCM.
7. Who are not required to pay GST on reverse charge basis in respect of legal services availed from an advocate?
The following service recipients are not required to pay GST on reverse charge basis
- Central Government, State Government, Local authorities, Union Territories, Governmental authority & Governmental entity.
- Unregistered persons (i.e. any person other than a business entity)
- Business entity whose turnover does not exceed Rs. 20 lakhs /10 lakhs in the immediately preceding financial year.
- Individual advocate or firm of advocates other than senior advocate.
8. Should advocates providing legal services get themselves registered under GST?
- As per Section 23 of the CGST Act, 2017, persons who exclusively supply goods/services, the tax on which is liable to be paid on reverse charge basis need not get themselves registered under GST.
- So, an advocate providing only legal services, the entire tax on which should be paid by the service recipient on reverse charge basis need not get registered under GST.
9. Who should pay GST if the recipient of legal services is a non-resident?
- There is no clarity regarding this issue from the CBIC yet. Due to the lack of clarity in this regard, we can assume that the legal services received by a non-resident from an individual advocate/firm of advocates/senior advocate is exempt from GST
- This conclusion is given based on entry 45 of notification no 12/2017 –CT which says that legal services provided to any person other than a business entity is exempt from GST.