Service Tax on Legal charges

[DK AGGARWAL]

Sir

We understand ST is payable on Advocate Fee( Legal lawyer who are appearing in court for Civil and criminal) as reverse charge.Please confirm if ST is applicable as reverse charge on Chartered Accountant, Sales Tax Advisors,Income Tax lawyers who are giving Bills without charging ST.

D K Aggarwal

[PAWAN KUMAR]

Dear Sir,

As per my view, as per notification No.30/2012-ST dated 20.06.2012, only the liability for advocate and lawyer under reverse charge is applicable subject to providing services to business entity located in the taxable territory. No service tax is applicable under reverse charge on chartered accountants.

[DK AGGARWAL]

Sir

Thanks for the prompt reply

Please confirm if ST (Reverse Charge) is applicable on Sales Tax and Income Tax advocates.

I have understood for Chartered Accountant being not applicable.

D K Aggarwal

[DR.MARIAPPAN GOVINDARAJAN]

Bombay High Court confirmed the service tax on services of Advocates. The Delhi High Court stayed the same and yet to be finalised.

[PAWAN KUMAR]

Dear Sir,

As per notification No.30/2012-ST dated 20.06.2012, the person being an advocate if provides services to an business entity located in taxable territory. The notification does not specify the nature of work being looked after by the advocate/lawyer. Therefore as per my view if an advocate providing any legal service whether in the nature of advise for sales tax and income tax, liability shall be under reverse charge mechanism. The definition of legal services clearly covers the advise and consultancy as herein under :

‘(cca)“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;

[Akash Deep]

its a nice question.

reverse charge liability come in operation only in case of lawyers giving legal services. however definition of legal services no where provides that legal services can only be provide by lawyers, consultancy in law can be provided by any person having requisite knowledge of law.

so if a person who is not an advocate, but provide legal services, he shall be liable to pay tax inf there is tax liability. However in case of a lawyer service recipient shall be liable to pay tax if there is any tax liability.

in this case though the foreing lawyers is not advocate as per Advocates, service receipeint is still liable to pay tax he is importing services.

[DK AGGARWAL]

Dear Mr Akash Deep

Thanks for the reply

Sir, can the Chartered Accountants, Service Tax consultant, projects consultant be considered as Legal Service for reverse charge payment

D K Aggarwal

[Akash Deep]

Dear Sir,

Let me discuss it in detail. As per the definition of legal services provided under Rule 2(1)(cca) "legal services means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner, and includes representational service before any court, tribunal or authority. it is no where provided in the definition that only advocates as defined under advocates Act, are eligible to provide advice, consultancy and representational services. It is true that only lawyers are eligible to represent in courts. However in case of tribunals and other authorities, lawyers and as well as other persons like CAs are also eligible to represent.

Legal services provided by advocates or a partnership firm of advocates to a business entity having turnover up- to 10 Lacks in preceding financial year is exempted. Legal services provided by advoicate or partnership firm of advocates to a business entity having turnover more than ₹ 10 Lakh in preceding financial year is taxable and such services has been specified under Rule 2(1)(d) of service tax rules, 1994 and Notification no. 30/2012. Because only legal services provided by advocates or partnership firm of advocates are mentioned under Rule 2(1)(d) of service tax rules, 1994, that's why reverse charge mechanism is applicable on legal services provided by advocates.

Service tax consultant and project consultant, who are able to give advice or consultancy in law because of their experience in law, but not acting as an advocate ( i.e. advocate as per advocates Act,) will not be covered under reverse charge mechanism. Meaning thereby such consultant are liable to collect and pay service tax. Such consultant can be treated as legal consultant but services provided by such consultant will not be covered under revere charge mechanism.

regarding CAs, it is very clear that they are governed by ICAI Act, and they can not act as CA and an advocate simultaneously. As Chartered Accountant services are not specified under Rule 2(1)(d) and also not notification no. 30/2012, reverse charge mechanism will not be applicable.

In nutshell, service provided by chartered accountant and service tax consultant and project consultant who are not acting as an advocate, are not covered under reverse charge mechanism.

[DK AGGARWAL]

Shri Akash Deep Ji

Thanks for the detailed reply.

I am fully satisfied to my query.

Thanks once again

D K Aggarwal

AI Summary

Reverse charge on legal services applies to advocates; non-advocate professionals remain liable as service providers for service tax. Reverse charge liability for service tax attaches to legal services supplied by advocates or advocate firms to business entities in the taxable territory as defined by the service tax rules; non-advocates including chartered accountants and other consultants are not covered by the reverse charge listing and therefore remain liable as service providers to collect and pay service tax where applicable; exemptions for advocate services to small business recipients below a prescribed turnover threshold are noted.