Service tax leviable on services rendered by the Advocate and Senior Advocate under Reverse Charge

[CA Bimal Jain]

The Hon’ble Karnataka High Court in the case of MR. PRASHANTH SREEDHAR SHENOI, V. RAGHURAMAN, ADVOCATE, SRI C.V. SUDHINDRA, SRI THURUNAS KRISHNACHARI SURESH, SHRI MANOHAR JEERIGE, SHRI MADHUSUDAN R. BIDI, VERSUS ASSISTANT COMMISSIONER OF CENTRAL TAX, BANGALORE, JOINT COMMISSIONER OF CENTRAL TAX BANGALORE, UNION OF INDIA, THE SUPERINTENDENT OF CENTRAL TAX, DSD-2 BENGALURU, THE PRINCIPAL CHIEF COMMISSIONER OF CENTRAL TAX BENGALURU - 2024 (5) TMI 466 - KARNATAKA HIGH COURT allowed the writ petition and held that, the services of legal professionals consisting of partnership firm of Advocates or an individual Advocate other than a Senior Advocate is exempt from levy of service tax to an advocate or partnership firm of advocates providing legal services to any person other than a business entity or a business entity with a turnover upto ten lakh rupees in the preceding financial year. Also, even when the individual advocate or partnership firm of advocate or senior advocate does not fall within the purview of the exemption notification, the service recipient is liable to pay service tax on the aforesaid services on reverse charge basis.

Facts:

Mr. Prashanth Sreedhar Shenoi (“the Petitioner”) and other related Petitioners are practicing Advocates and have questioned the veracity of the show cause notice, order-in-original and recovery notice issued by the Revenue Department (“the Respondent”) by way of filing the writ petition before the Hon’ble High Court praying for setting aside the Impugned Order and quashing the proceedings initiated by the Respondent as per the Impugned Order.

Issue:

Whether service tax is leviable on services rendered by the Advocate and Senior Advocate?

Held:

The Hon’ble Karnataka High Court in the case of MR. PRASHANTH SREEDHAR SHENOI, V. RAGHURAMAN, ADVOCATE, SRI C.V. SUDHINDRA, SRI THURUNAS KRISHNACHARI SURESH, SHRI MANOHAR JEERIGE, SHRI MADHUSUDAN R. BIDI, VERSUS ASSISTANT COMMISSIONER OF CENTRAL TAX, BANGALORE, JOINT COMMISSIONER OF CENTRAL TAX BANGALORE, UNION OF INDIA, THE SUPERINTENDENT OF CENTRAL TAX, DSD-2 BENGALURU, THE PRINCIPAL CHIEF COMMISSIONER OF CENTRAL TAX BENGALURU - 2024 (5) TMI 466 - KARNATAKA HIGH COURT held as under:

• Noted that, as per Clause 6(b) of Notification No. 25/2012-ST dated June 20, 2012 (“the Exemption Notification”), the services of legal professionals consisting of partnership firm of Advocates or an individual Advocate other than a Senior Advocate is exempt from levy of service tax to an advocate or partnership firm of advocates providing legal services, any person other than a business entity or a business entity with a turnover upto ten lakh rupees in the preceding financial year.
• Opined that, even when the individual advocate or partnership firm of advocate who do not fall within the purview of the exemption notification, the service recipient is liable to pay service tax on the aforesaid services.
• Further Opined that, in case of Senior Counsel, the recipient of the service is liable to pay service tax.
• Held that, the Impugned Order and Recovery Notice is set aside.

Our Comments:

As per Circular No. 27/01/2018-GST dated January 04, 2018, the GST has to be paid on reverse charge basis by the business entity in case of legal services including representational services provided by an Advocate including Senior Advocate to the business entity.

Also, As per S. No. 45(b) of Services Exemption Notification no. 12/2017-Central Tax (Rate) dated June 28, 2017 , any services provided by 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; any person other than a business entity, or (ii) any person other than a business entity; or (iii) a business entity with an aggregate turnover up to such amount in the preceding financial year, which makes it eligible for exemption from registration under GST; (iv) the central government, state government, union territory, local authority, governmental authority or government entity are exempted from GST.

Further, as per S. No. 45(c) of Services Exemption Notification no. 12/2017-Central Tax (Rate) dated June 28, 2017, any services provided by 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 such amount in the preceding financial year, which makes it eligible for exemption from registration under GST; or (iii) the central government, state government, union territory, local authority, governmental authority or government entity are exempted from GST.

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