S.Tax liability on Advocate Service and Input status

[Mathurthi RamKumar]

Dear All,

Greeting of the day. Kindly confirm that S.tax liability on Advocate Services from 01.04.2016. How much limit and how much % will pay service receiver. Cenvat input can utilized for above payment.

Regards

M.RamKumar

[Ganeshan Kalyani]

Sir, 100% liability of ST is on the company receiving the service. Denver credit is eligible subject to condition. Thanks.

[KASTURI SETHI]

I endorse the views of Sh.Ganeshan kalyani, Sir. Further, I add that Small Scale exemption Notification No.33/12-ST does not allow i.e. threshold exemption limit of Rs.ten lakhs to the Service Receiver under RCM. (Except where Service is received from Govt.)

[Ganeshan Kalyani]

Sir please read Denver as Cenvat in my reply. Apologising for typing error. Thanks.

[CSSANJAY MALHOTRA]

Addition to what my friends have shared. If Senior Advocate renders any services to another advocate, then Senior Advocate has to charge Service Tax at the applicable rate...No RCM is this case...

W.e.f. 01/04/2016 Service Tax Exemption has been withdrawn in the following services, i.e.-

* Services provided by a Senior advocate to an advocate or partnership firm of advocates,

* Services provided by a Senior advocate as a person represented on an arbitral tribunal to an arbitral tribunal &

* Services provided by a Senior Advocate to a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession having turnover of upto 10 lakh in preceding financial year

Service tax in the above instances would be levied under forward charge. Hence service provider (i.e. Senior Advocate) shall be liable to service tax.

However, the existing dispensation regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued.

 

[CSSANJAY MALHOTRA]

Please also refer Notification No. 09/16 and 18/16 dated 01.03.2016

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Thanks Sir for elaboration and clear-cut reply.It clears all the doubts.

[Ganeshan Kalyani]

Sir, just for discussion - what would be reason behind bringing the Senior Advocate under forward charge. Thanks.

[CSSANJAY MALHOTRA]

Dear Sh. Ganeshan ji,

I still recollect the very valid concern raised by you in Feb-16 (Issue ID : 109929) as to why Advocates can't be brought under service tax net as they provide legal services similar to what is in many casses provided by CA/CS/CWA.

You shouold appreciate that your part problem is resolved by CEBC thus bringing Senior Advocates under Service Tax net.

Let me share my experiences with you from the meetings I attended during Pre-Budget Memorandum.

Senior Advocates has been noticed hired back to back by other advocates for rendering service , wherein they charged hectic amount, wherein tax remains unpaid as S.Tax was on services rendered to Business entity. Besides this they are less in Nos but value wise earns more than the junior advocates, hence easy to do compliance also.

In long run, others too will be under forward charge.....

[Ganeshan Kalyani]

Sir, thanks for sharing your experience. Sir the request of Senior Advocates has been considered by various High Courts and therefor the rule is again amended to bring their services under reverse charge subject to some conditions. Thanks.

[CSSANJAY MALHOTRA]

Respected Sh. Ganeshan ji,

Yes, I have gone through the Notifications No. 33 & 34/2016-ST yesterday.

Not looks good at the level of Senior Advocates (Law followers). They should make compliance and could have followed in true spirit rather than putiing everything back on shoulder of service receiver.

CBEC should withdraw the reverse charge in totality as the servie provided by lawyers at Tribunal level are same as provided by CA/CS/CMA..

AI Summary

Reverse charge on advocate services makes service recipients liable and affects cenvat credit eligibility under new notifications.
Where legal services fall under the reverse charge mechanism, the service recipient is liable to discharge service tax and may avail Cenvat credit subject to conditions; small service threshold exemptions do not generally relieve the service recipient. Notifications in early 2016 altered the charge mechanism for certain senior advocate services, creating instances of forward charge and changing applicability for services to advocates, arbitral tribunals and business persons, while the existing dispensation for advocate firms and non-senior advocates remains.