GST On Legal Services By Lawyers And Law Firms On ‘Reverse Charge’ Basis: GST Council Clarifies

In the 20^th GST Council meeting held on Saturday, it has been clarified that the GST on services provided by lawyers including Senior Advocates and law firms would be applicable on a ‘reverse charge’ basis.

“To clarify that legal services (including representational services) provided by an individual advocate or a senior advocate or a firm of advocates (including LLP) provided to a business entity in taxable territory are covered under reverse charge mechanism,” a list of decisions taken during the meeting stated.

The Finance Ministry had also, last month, clarified that legal services provided by an individual Advocate, including a Senior Advocate and a Firm of Advocates are liable for payment of GST under the reverse charge by the business entity. The Delhi High Court had, however, soon after asked the Centre to clarify the “legal sanctity” of the Press Release issued by the Finance Ministry.

The Court had also issued interim orders, directing the Centre to abstain from taking any coercive action against lawyers and law firms for non-compliance with any legal requirement under the CGST Act, IGST Act or the DGST Act.

The order was issued by a Bench comprising Justice S. Muralidhar and Justice Pratibha M. Singh on a Petition filed by J.K. Mittal & Company, which has challenged notifications issued by the Centre and Delhi Government, wherein it was prescribed that advocates and law firms would pay the tax on all services offered by them. Only representational services were made an exception, dictating that it would be the clients who would pay the tax for such services.

The Petitioner has claimed that this is contrary to the recommendation made by the GST Council that the service recipient would pay the tax on all services offered by a lawyer and a law firm. Besides, the Petitioner has also sought clarification on the need for re-registration for lawyers who had already registered themselves under the Finance Act, 1994.