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.

[YAGAY andSUN]

There is no exemption to the company which is receiving the services under RCM.  Service tax will be payable under RCM under LEGAL Services by the Trading company provided such services were provided by the LLP, Firm, HUF etc.

[Guest]

in RCM there is no threshold limit for the service receiver, if he is a company, he has to pay his portion of service tax, based on the taxable services received by him.

Regards

BDB

 

[Praveen Mittal]

Threshold limit of Rs.10L is to be checked in case of taxable output service only and not for paying service tax under reverse charge mechanism.  Where an Individual Advocate or Firm of Advocates provides for legal services to any business entity, service tax is required to be paid by such business entity.  Following tow points are important here to note: -

1.  Business entity can be Individual, Partnership Firm or Company;

2.  Such Business entity should be located in the taxable territory only

 

[Shyam Naik]

Dear Experts,

Kindly refer to para 6(b)(iii) of notification no. 25/2012-ST dated 20/06/2012.

In terms of the said para services provided in respect of Legal Services to a business entity with a turnover up to Rs. 10 Lacs in the preceding financial year is exempt.

Whether the term turn over would cover turnover of output services only or it would cover turnover from trading activities as well?

The service receiver in the instant case is a company engaged in trading only and the turnover in the preceding financial year exceeds Rs. 10 Lacs. .

Kindly opine and oblige.

Thank You.

[Guest]

6, Services provided by-(b)  an individual as an advocate or a partnership firm of advocates by way of   legal services to,-(ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year

Turnover includes gross sales done by a company

[Mukesh Shah]

Dear Shyam, 

Trading of goods is exempted service (Section 66D (e)), So it gets included in turnover for the question under consideration. 

AI Summary

Reverse charge on legal services may require business recipients to pay tax unless turnover falls below a statutory small turnover exemption. A business entity receiving legal services from an individual advocate or a firm must pay service tax under the Reverse Charge Mechanism when the provider is an advocate or advocate firm and the recipient is located in the taxable territory. The small turnover exemption in the notification applies to recipients whose preceding year turnover does not exceed the statutory ceiling, and 'turnover' has been treated to include gross sales from trading and exempted activities, so trading companies whose total turnover exceeds that ceiling remain subject to RCM for legal services.