Advocate or Arbitral Tribunals' Services - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 6 Advocate or arbitral tribunals (w.e.f. 1st July, 2012) Scope of Exempt Service Notification no. 25/2012 dated 20.06.2012 From 1.7.2012 to 31.3.2016 Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; (b) an individual as an advocate or a partnership firm of advocates 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 a turnover up to rupees ten lakh in the preceding financial year; or (c) a person represented on an arbitral tribunal to an arbitral tribunal; From 1.4.2016 to 05.06.2016 - Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh 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 a turnover up to rupees ten lakh in the preceding financial year (c) a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. Amending Notes: (w.e.f 1.4.2016 ) Services provided by a senior advocate to an advocate or partnership firm of advocates, and A person represented on an arbitral tribunal to an arbitral tribunal; Service tax in the above instances would be levied under forward charge. However, the existing dispensation regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued From 6.6.2016 Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh 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 a turnover up to rupees ten lakh 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 a turnover up to rupees ten lakh in the preceding financial year;]] Meanings and Definitions: (a) advocate has the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Advocates Act, 1961 ( 25 of 1961), (c) arbitral tribunal has the meaning assigned to it in clause (d) of section 2 of the Arbitration and Conciliation Act, 1996 (26 of 1996), business entity means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession; (w) legal service 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; (zdd) senior advocate‟ has the meaning assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961);] (See Notification no. 25/2012 dated 20.06.2012 , effective from 01.07.2012) Clarification by the Board ( Taxation Guide Guidance Note 7 Exemptions dated 20.06.2012) 7.6.1 What is the tax liability of advocates, or arbitral tribunal in respect of services provided by them? Advocates can provide services either as individuals or as firms. Legal services provided by advocates or partnership firms of advocates are exempt from service tax when provided to the fallowings: an advocate or partnership firm of advocates providing legal services (same class of persons) any person other than a business entity a business entity with a turnover up to rupees ten lakh in the preceding financial year However, in respect of services provided to business entities, with a turnover exceeding rupees ten lakh in the preceding financial year, tax is required to be paid on reverse charge by the business entities. Business entity is defined in section 65B of the Finance Act, 1994 as 'any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession'. Thus it includes sole proprietors as well. The business entity can, however, take input tax credit of such tax paid in terms of Cenvat Credit Rules, 2004 , if otherwise eligible. The provisions relating to arbitral tribunal are also on similar lines. 7.6.2 I am serving as a member of an arbitral tribunal comprising many arbitrators and receiving an amount from the arbitral tribunal. Am I providing a service and required to pay service tax on such amount received? Arbitral tribunal comprising more than one arbitrator will constitute an entity by itself. Thus services of individual arbitrator when represented on such an arbitral tribunal will also constitute service by one person to another. However such service is exempt under sr. no. 6(c) of the mega notification. Further see: Clarification regarding leviability of service tax in respect of services provided by arbitral tribunal and members of such tribunal - Dated 18-5-2016 - Service Tax