Legal Services Exempted From GST Net, Senior Engagement Will Continue To Be Taxable As Earlier

Services provided or agreed to be provided to a person including a business entity with a turnover up to twenty lakhs in preceding financial year by an individual advocate or firm of advocates will continue to be service tax free under the new Goods and Services Tax regime also. Both direct and indirect legal service are not taxable.

Though the service tax is exempted for Senior Advocate providing service to Person and business entity with turn over less than twenty lakhs, the service provided by a senior advocate to an Advocate firm or Advocates is not exempted.

Similarly, the services provided by an arbitral tribunal to any business entity whose turnover is less than twenty lakhs are also not taxable.

Service Tax is also exempted for services provided by educational institutions to its students. Services provided to educational institutions like transportation, catering, security and cleaning etc. are also exempted. Services by way of collecting and providing news by an independent journalist is also exempted.

82 categories of services which was exempted earlier would continue to be exempted under the new regime as well. Service provided by GST Network to Governments for implementation of GST is also exempted.

Senior Advocates

Last year Ministry of Finance had issued a notification exempting services provided by a Senior Advocate by way of legal services to any person other than a business entity; or a business entity with a turnover up to rupees ten lakh in the preceding financial year. By way of another notification it is made it clear that tax is to be paid by the recipient of service and if the senior advocate is engaged by another lawyer, the Service Tax is to be paid by the litigant.

“in relation to service provided or agreed to be provided by a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, and the senior advocate is providing such services, the recipient of such services, which is the business entity who is litigant, applicant, or petitioner, as the case may be” states the notification

The Government of India has issued three notifications relating to Service Tax to lawyers on 6th June, 2016. Notification 34/2016 seeks to amend notification No. 30/2012-Service Tax dated 20th June, 2012, so as to prescribe extent of payment of service tax by a business entity as a recipient of services provided by senior advocates. Notification 35/2016 seeks to amend Service Tax Rules, 1994 so as to specify the business entity as the person liable to service tax in respect of services provided by senior advocates. Notification 35/2016 seeks to amend notification No. 25/2012 – Service Tax, dated the 20th June, 2012, so as to exempt the legal services provided by senior advocates to a business entity with a turnover up to rupees ten lakh in the preceding financial year.

But the above notifications were stayed by most of the High Courts.