Legal Services

[CA Akash Phophalia]

In the erstwhile law legal services were introduced in the ambit of taxability under Service tax. With the introduction of negative list the service is taxable in itself as this service is not mentioned in the Negative list under section 66D of the Finance Act 1994. However, the exemption is provided under Notification No 25/2012 dated 20.06.2012 in entry no 6 which says as :-

“Services provided by -

1. An arbitral tribunal to -

1. Any person other than a business entity; or
2. A business entity with a turnover up to rupees ten lakhs in the preceding financial year;

2. An individual as an advocate or a partnership firm of advocates by way of legal services to -

1. An advocate or partnership firm of advocates providing legal services
2. Any person other than a business entity; or
3. A business entity with a turnover up to rupees ten lakhs in the preceding financial year; or

3. A person represented on an arbitral tribunal to an arbitral tribunal.”

The exemption can be listed as :-

Service Provider	Service Receiver	Taxability	Nature of Service
Arbitral Tribunal	Any person other than business entity	Not taxable	Any Service
	Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year.	Not taxable
	Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year.	Taxable
Individual Advocate	Individual Advocate	Not taxable	Legal Services
	Partnership firm of Advocates	Not taxable
	Any person other than business entity	Not taxable
	Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year.	Not taxable
	Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year.	Taxable
Firm of Advocates	Individual Advocate	Not taxable	Legal Services
	Partnership firm of Advocates	Not taxable
	Any person other than business entity	Not taxable
	Business Entity with a turn over upto ₹ 10 lakhs in the preceding financial year.	Not taxable
	Business Entity with a turn over more than ₹ 10 lakhs in the preceding financial year.	Taxable
Any Person	Arbitral Tribunal	Not Taxable	Appearance before an arbitral tribunal

Meaning of different Terms

Terminology	Meaning
Arbitral Tribunal	It is a panel of one or more adjudicators which is convened and sits to resolve a dispute by way of arbitration. Arbitration is a forum of ADR for resolution of disputes outside the courts.
Individual Advocate	Advocate means an advocate entered in any roll under the provisions of the Advocates Act 1961. In other words a person who had obtained a degree in Law from any University in India or from any University outside the territory of India which is recognized for the purpose of the Advocates Act by the Bar Council of India is eligible for making application to the Bar Council for enrolling himself as an advocate.
Legal Services	It 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.
Any Service	But the activities of arbitral tribunal is to resolve the dispute as stated in the meaning of arbitral tribunal.
Business Entity	Business entity means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. In other words it is an activity with the motive of earning profit.

Reverse Charge

The taxable service is brought under reverse charge net and the liability to pay service tax is casted on the service receiver to the extent of 100%.

CENVAT Credit

The legal service is covered under input services; therefore, the CENVAT credit of the same is available subject to other provisions of the CENVAT Credit Rules 2004.

This is just for your reference. It does not constitute our professional advise or recommendation.

CA Akash Phophalia

9799569294

[email protected]

Office No 3

Second Floor

Amrit Kalash

Residency Road

Near Bombay Motor Circle

Jodhpur - 342001

Rajasthan