Service Tax on Legal Services on RCM

[Shyam Naik]

Dear Experts,

A Company is engaged in trading activities and the turnover from trading in goods is more than 10 Lacs. The Company does not provide any service.

Whether, the company shall be liable to pay service tax on Reverse Charge Mechanism on Legal Services received by it.

Kindly opine.

Thank You.

AI Summary

Company Must Pay Service Tax on Legal Services Received Under RCM, No Exemption for High Trading Turnover A company engaged solely in trading activities with a turnover exceeding 10 lakh rupees is questioning its liability to pay service tax under the Reverse Charge Mechanism (RCM) for legal services received. Experts clarify that there is no exemption for companies receiving services under RCM, and service tax must be paid regardless of the company's turnover. The threshold limit of 10 lakh rupees applies only to taxable output services, not for RCM. Legal services provided by advocates to business entities require the entity to pay service tax if located in a taxable territory. Trading turnover is included in the turnover calculation for this purpose.