SERVICE TAX ON REVERSAL BASIS - LEGAL SERVICES

[RAM AVTAR]

Any update on below issue

Service tax on legal services provided by an advocate (whether individual or firm) to any business entity has been imposed vide the Finance Act, 2012 under reverse charge mechanism wherein service recipient is liable to deposit service tax on fees paid to advocates.

High Court of Delhi vide order dated 21.09.2012 has stayed the implementation of this amendment in a petition (W.P.(c) No. 5957/2012) led Mr. A. S. Chandhiok, Sr. Adv. with Mr. Ruchir Bhatia, Adv. for Delhi Tax Bar Association. = 2013 (4) TMI 77 - DELHI HIGH COURT

[DR.MARIAPPAN GOVINDARAJAN]

The Delhi High Court still extended the stay. But the Mumbai High Court upheld the validity of levying of service tax on reverse charge mechanism on the legal services.

AI Summary

Reverse charge on legal services shifts tax remittance to recipients, creating divergent enforcement across jurisdictions. Service tax on legal services is placed on the service recipient under a reverse charge mechanism, shifting remittance and compliance obligations from advocates to recipient businesses. Judicial responses diverge: one high court has stayed the amendment's operation while another has upheld the validity of the recipient-based liability, creating a jurisdictional split in enforcement and attendant compliance consequences for recipients.