We are discussing below various provision under the GST Laws relating to Exemption, Reverse Charge and requirement for Registration of Advocate’s under GST.
For the purpose of GST, Advocates have been been divided into 2 Categories:-
a) An Individual Advocate or Firm of Advocates; and
b) Senior Advocate
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(A) EXEMPTION PROVIDED TO ADVOCATES UNDER GST
Sl. No. 47 of the List of Services liable to NIL Rate of Tax under GST are noted below:-
Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year;
(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in thecase of special category states) in the preceding financial year;
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year
(B) COVERAGE OF ADVOCATE SERVICES UNDER REVERSE CHARGE MECHANISM (RCM)
The government has provided RCM in case of Advocate Service as below:-
a) Which Service is Covered – Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly;
b) Who should be the provider of Service – An individual advocate or firm of advocates;
c) Who should be the Recipient of Service – Any Business Entity
d) Proportion of GST Liability:-
i) Service Provider – NIL
ii) Service Recipient – 100%
[NOTE – RCM is equally applicable in case of Senior Advocates as the same are covered within the meaning of Advocate;]
(C) EXEMPTION FROM REGISTRATION
Notification No. 05/2017 – Central Tax dated 19th June, 2017 (Copy Attached below) provides exemption as below:-
“In exercise of the powers conferred by sub-section (2) of section 23 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government hereby specifies the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act.”
(D) LIABILITY OF REGISTRATION & PAYMENT UNDER GST:-
1. By virtue of discussion in Para (A), (B) and (C) above, “a partnership firm of advocates or an individual as an advocate other than a senior advocate” is not required to pay GST on the Services given by them : it is either NIL Rated under GST or liable to be taxed under Reverse Charge Mechanism (RCM);
2. In case of Senior Advocate, there are multiple scenarios to be considered:-
Case 1) When the Services of a Senior Advocate is taken by Business Entity (Turnover exceeding 20 Lakhs) for their business and the payment is directly made by them to the Senior Advocate : Business Entity has to pay GST on the services of Sr. Advocate under RCM – No GST liability on Senior Advocate;
Case 2) When the Services of Senior Advocate have been taken by “an advocate or partnership firm of advocates providing legal services” for another business entity and the payment to such Sr. Advocate is made by such “advocate or partnership firm of advocate” out of the fees they have charged from such Business Entity : Business Entity has to pay GST on the payment made to “advocate or partnership firm of advocate providing legal services” hence indirectly the GST under RCM has been paid on the Services rendered by Senior Advocate. It is important to note here that the ultimate recipient of services of Sr. Advocate is the Business Entity irrespective of the fact that the payment is made by “advocate or partnership firm of advocate providing legal services” – In our view, there is no liability for registration or payment of GST on Senior Advocate or “advocate or partnership firm of advocate providing legal services” who has made the payment to the Senior Advocate;
Case 3) When the Services of Senior Advocate have been taken by “an advocate or partnership firm of advocates” having a turnover exceeding Rs. 20 Lakhs for their self consumption:
Point of Consideration 1 : Is the business of an Advocate or Firm of Advocates covered under the definition of ‘Business Entity’?
Law: As per section 2 (17) “business” includes–
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
Our View: Advocacy is a Profession, hence shall be covered within the Definition of Business. In our view an individual Advocate or Firm of Advocates shall be considered as a ‘Business Entity’.
Point of Consideration 2 : Is there a GST Liability on the Service Provided by a Senior Advocate to “an advocate or partnership firm of advocates providing legal services” having a Turnover exceeding Rs. 20 Lakhs?
Our View : Yes
WHO WILL TAKE REGISTRATION & PAYMENT OF GST : In our view, in case 3, it will be the responsibility of the recipient of service i.e. “advocate or partnership firm of advocates” to obtain registration under the GST Act and make the payment of GST on the fees paid to the Senior Advocate under the Reverse Charge Mechanism (RCM).
DISCLAIMER: The Views expressed in this article are strictly personal and for knowledge of our clients only. The contents of this article are solely for informational purpose and it does not constitute any professional advice or recommendation. The laws related to GST are under evolution and subject to constant changes and amendments over time. It is suggested to take specific legal advice and necessary due diligence before relying on the contents and information of this article. The authors of this article, does not accept any liabilities for any loss or damage of any kind arising out of information on this article and for any actions taken in reliance thereon.