TaxTMI 
TaxTMI 
TaxTMI 
In the erstwhile law legal services were introduced in the ambit of taxability under Service tax. With the introduction of negative list the service is taxable in itself as this service is not mentioned in the Negative list under section 66D of the Finance Act 1994. However, the exemption is provided under Notification No 25/2012 dated 20.06.2012 in entry no 6 which says as :-
“Services provided by -
- An arbitral tribunal to -
- Any person other than a business entity; or
- A business entity with a turnover up to rupees ten lakhs in the preceding financial year;
- An individual as an advocate or a partnership firm of advocates by way of legal services to -
- An advocate or partnership firm of advocates providing legal services
- Any person other than a business entity; or
- A business entity with a turnover up to rupees ten lakhs in the preceding financial year; or
- A person represented on an arbitral tribunal to an arbitral tribunal.”
The exemption can be listed as :-
Service Provider | Service Receiver | Taxability | Nature of Service |
Arbitral Tribunal | Any person other than business entity | Not taxable | Any Service |
Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year. | Not taxable | ||
Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year. | Taxable | ||
Individual Advocate | Individual Advocate | Not taxable | Legal Services |
Partnership firm of Advocates | Not taxable | ||
Any person other than business entity | Not taxable | ||
Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year. | Not taxable | ||
Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year. | Taxable | ||
Firm of Advocates
| Individual Advocate | Not taxable | Legal Services |
Partnership firm of Advocates | Not taxable | ||
Any person other than business entity | Not taxable | ||
Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year. | Not taxable | ||
Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year. | Taxable | ||
Any Person | Arbitral Tribunal | Not Taxable | Appearance before an arbitral tribunal |
Meaning of different Terms
Terminology | Meaning |
Arbitral Tribunal | It is a panel of one or more adjudicators which is convened and sits to resolve a dispute by way of arbitration. Arbitration is a forum of ADR for resolution of disputes outside the courts. |
Individual Advocate | Advocate means an advocate entered in any roll under the provisions of the Advocates Act 1961. In other words a person who had obtained a degree in Law from any University in India or from any University outside the territory of India which is recognized for the purpose of the Advocates Act by the Bar Council of India is eligible for making application to the Bar Council for enrolling himself as an advocate. |
Legal Services | It 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. |
Any Service | But the activities of arbitral tribunal is to resolve the dispute as stated in the meaning of arbitral tribunal. |
Business Entity | Business entity means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. In other words it is an activity with the motive of earning profit. |
Reverse Charge
The taxable service is brought under reverse charge net and the liability to pay service tax is casted on the service receiver to the extent of 100%.
CENVAT Credit
The legal service is covered under input services; therefore, the CENVAT credit of the same is available subject to other provisions of the CENVAT Credit Rules 2004.
This is just for your reference. It does not constitute our professional advise or recommendation.
CA Akash Phophalia
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