Legal Services and liability

[Alkesh Jani]

Sir,

The Standing Counsel providing legal service i.e. to say representational service, to the Govt. Department or to the Board and bill is raised in the name of HOD of the Govt. Department. Now the query is

Q.1. Whether this activity falls under Section 9 (3) or 9(4) of CGST Act,2017?

Q.2. If it falls under Section 9(3), then Govt. Department is required to take registration and pay appropriate GST on RCM basis?

Q.3. If the answer to Q.2 above is “Yes” and if Department has not obtained registration then SCN is required to be issued to HOD or DDO (Drawing and Disbursement Officer)?

Thanks in Advance

[KASTURI SETHI]

RCM is applicable only if service is provided to business entity and Govt. is not business entity.

[Rajagopalan Ranganathan]

Sir,

As per Sl. No. 2 of Notification No. 13/2017-Central Tax (Rate) dated 28.6.2017 " Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly. to any business entity located in the taxable territory, then the business entity is liable to pay gst under RCM.

The Government cannot be treated as business entity since it is exercising soverign functions entrusted under the Constitution of India. Therefore HOD or DDO need not required to regiister under GST Act and pay the gist on RCM basis. This is my opinion.

[Alkesh Jani]

Sir, Thanks for reply, if RCM is restricted to business entity only,then will that services will fall under Section 9(4) of CGST, Act, 2017? (as per definition "person" includes Govt.) and as there is no exemption in this regards.

[KASTURI SETHI]

The 25th Goods and Services Tax (GST) Council meeting recommended the Central Government to exempt legal services provided to Government, Local Authority, Governmental Authority and Government Entity.

Read more at: http://www.taxscan.in/legal-services-provided-govt-entities-service-providing-information-rti-act-exempted/16379/

[YAGAY andSUN]

We endorse the view of Kasturi Sir.

The 25th Goods and Services Tax (GST) Council meeting recommended the Central Government to exempt legal services provided to Government, Local Authority, Governmental Authority and Government Entity. The Council also exempted supply of services by way of providing information under RTI Act, 2005 from the levy of GST. Currently, 18 per cent GST is applicable on such services. Consequently, persons filing RTI applications were asked to pay GST when he asked for information under the RTI Act.
 

[Alkesh Jani]

Sir, I thank all our experts for expressing their valuable views, as this is a discussion forum, based on the reply, the question arises is, it is recommendation of the GST Council. As there is no notification issued in this regards, so recommendation only cannot be the base of exemption.

Second query can be raised is, if legal services are under RCM for business entity, then will it be under forward charge for Charitable Trust, Society, NGOs, non-profit companies, which are not business entity, and can be covered under Section 9(1) of CGST Act,2017.

I am raising these queries just to enrich my knowledge.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,. Logically legal services should come under "forward charges" for the categories you have mentioned but I could not trace out the basis. Secondly, notification must have been issued by now because yesterday 27th meeting has been held. If not, matter should be brought to the notice of GST Council.

[YAGAY andSUN]

We are also amenable with the views of Mr. Jani. This matter needs to bring in the Knowledge of GST Council.

[Ganeshan Kalyani]

Notification is expected in this regard.

[rajkumar shukla]

WHEN GOVTS IS COVERED UNDER PERSON, WHY CAN'T EXEMPTION PROVIDED UNDER NOTIFICATION 12/2017 APPLY WHICH EXEMPTS LEGAL SERVICES PROVIDED TO ANY PERSON OTHER THAN BUSINESS ENTITY.

AI Summary

Taxation of legal services: recipient status determines reverse charge or forward charge; exemption awaits formal notification. Whether legal services to government departments fall under the reverse charge mechanism hinges on recipient status: RCM applies to services provided to a business entity, and government exercising sovereign functions is not a business entity, so departments need not register or pay under RCM absent a notification. The GST Council recommended exemption for legal services to government entities, but that recommendation is not operative law until notified. Treatment of charitable trusts and non-profit entities remains uncertain and may logically attract forward charge, subject to formal clarification.