Taxability on Legal Services by an individual to Business entity

[rajiv patkar]

Legal services rendered by an individual to an business entity was non-taxable till the year 2011-12 and  even prior to 1st July, 2012.

The query is that whether the said services continue to be exempted or otherwise and under which provision. Plese note that I am not an Advocate to be exempted by virtue of reverse charge mechanism,

 

Please advise.

[Puneet Agrawal]

Legal service provided by an individual as an advocate or Partnership Firm of advocates to a business entity with a turnover not exceeding rupees ten lakh in the preceding financial year is exempted vide notification  no. 25/2012 Dated 20/06/2012  (Sr. No. 6)w.e.f. 1-7-2012.

[rajiv patkar]

What is the meaning of" by an individual as an advocate". The query is whether an individual who is not an advocate and rendering legal  services to business entity continues to be out of the service tax liabilty or otherwise for the year 2012-13 after crossing 10 lakhs receipt of payments w.e.f.01.07.2012

[LALIT MUNOYAT]

NO. Not exempt. In order to avail the exemption under entry 6(b) of the Mega Exemption the essential condition is that the person providing service must be an advocate. “Advocate” has the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Advocates Act, 1961 ( 25 of 1961).By your own statement  you are not an advocate and as such you services are taxable under Direct charge method.

 

AI Summary

Taxability of legal services: non-advocates providing services to businesses become taxable under direct charge post notified threshold.
Notification No. 25/2012 exempts legal services provided by an individual as an advocate or a partnership firm of advocates to a business entity with turnover below the notified threshold; the exemption depends on the meaning of Advocate in the Advocates Act, 1961. Services rendered by persons who are not advocates fall outside this exemption and are taxable under the Direct charge mechanism.