POSITION REGARDING APPLICABILITY OF GOODS AND SERVICES TAX ON LEGAL SERVICES

According to the Goods and Services tax (GST) Laws, legal services have been made taxable based on reverse charge mechanism. Reverse charge has been defined to mean the liability to pay tax is on the recipient of supply of goods or services or both instead of the supplier of such goods or services, in respect of certain categories of intra-state supply of goods and services under the Central GST (CGST) Act 2017 or inter-state supply of goods and services under the Integrated GST (IGST) Act 2017, whichever applicable.

The Ministry of Finance had issued a Notification, No. 13/2017-Central Tax (Rate) dated 28.6.2017, which provided that the central tax leviable under section 9 of the CGST Act on certain categories of supply of services supplied by a person, shall be paid on reverse charge basis by the recipient of such services. One of such categories of supply of services included legal services provided by an individual advocate including a senior advocate or firm of advocates (supplier of service) to any business entity located in the taxable territory (recipient of service):

Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity.

The Central Board of Excise and Customs (CBEC) has clarified regarding certain compliances in respect of supplies under reverse charge mechanism:

1. As per Section 24 (iii) of the CGST Act, 2017, every person who is required to pay tax under reverse charge has to register under the CGST Act, 2017.
2. As per CGST Act and Rules, the following documents have to mention whether the tax in respect of supply in the invoice is payable on reverse charge:
3. i) Every tax invoice, which is issued where the value of goods or services is more than two hundred rupees,
4. ii) Every receipt voucher, which is issued against receipt of advance payment and

• iii) Every refund voucher, which is issued in case, after issuance of receipt voucher, no supply is made and no tax invoice is issued.

3. Any person making advance payment for supplies has also to pay tax on reverse charge basis.
4. Upon supply of goods or services or both, the person liable to pay tax under Section 9 sub-section (3) or (4), has to issue a payment voucher at the time of making payment to the supplier.
5. The electronic cash ledger, maintained on the Common GST Electronic Portal by a registered person liable to pay tax, has to be debited to pay an amount under reverse charge.
6. Every registered person has to maintain records of all supplies attracting payment of tax on reverse charge basis.
7. The information about all supplies that attract reverse charge has to be furnished separately, rate wise, in the Table 4B of GSTR-1.

Therefore, as per the GST Laws and the CBEC, the legal services, which include representational services, provided by an advocate or firm of advocates are liable for payment of GST under reverse charge by the business entity or the recipient.