Yes you heard it Right!
GST is leviable on “Legal and Accounting Services”. The applicable rate is 18%.
Legal Service, in GST, 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.
EXEMPTIONs:
But there are exemptions on Legal Service from GST, when supplied by the following:
ADVOCATEs (other than Senior Advocates):
If the service is provided to:
- any person (includes juridical persons) which is not a business entity;
- any partnership firm of Advocates;
- any business entity with an aggregate turnover of such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017.
(Aggregate Turnover here means entire turnover of the firm including even non-taxable turnover; but excludes Tax amount and any inward supplies taxable under Reverse Charge).
The turnover eligible for exemption is Rs.40 Lakhs in respect of supplier of Goods and Rs.20 Lakhs for supplier of services. In respect of Special Category States viz. several hill states, this turnover is Rs.10 Lakhs for both goods and services.
[However, it doesn’t mean that an Advocate has to register and to pay tax on Legal Services provided to business entities having turnover beyond threshold limit. Here the business entity has to pay the Service Tax under Reverse Charge].
Partnership ADVOCATE firms:
- any person (includes juridical persons) which is not a business entity;
- any partnership firm of Advocates;
- any business entity with an aggregate turnover as above.
SENIOR ADVOCATEs:
- any person (includes juridical persons) which is not a business entity;
- any business entity with an aggregate turnover as above.
ARBITRAL TRIBUNALs:
The services of Arbitral Tribunals are also exempt when provided to non-business entities or to business entities with turnovers within limits ibid.
REVERSE CHARGE on the recipient of service:
Where a Business Entity is the recipient of Legal Service, it is liable to pay tax under Reverse Charge Mechanism. The liability to pay Service Tax under reverse charge is only where Legal Services received are from an Individual Advocate, a Senior Advocate, a firm of Advocates or an Arbitral Tribunal.
As mentioned, 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.
In fact, a Business Entity which has crossed the threshold turnover volumes in the preceding Financial Year, has to take a registration and pay service tax on its own products or services supplied to its buyers. On the Legal Services received from any Advocate, an Advocates’ firm, a Senior Advocate or an Arbitral Tribunal, it has to pay Service Tax itself under reverse Charge.
