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Service Tax on Senior Advocates on forward charge - academic exercise now?

By TIOL News Service

NEW DELHI, AUG 30, 2017: IN the matter of the changes relating to Service Tax in the Union Budget 2016, the JS TRU letter F. No. 334/8/2016-TRU dated February 29, 2016 clarified -

6.0  Review of Exemptions:

6.1 Exemption in respect of the following services is being withdrawn,-

- 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.

(Sl. No. (i) of Notification No. 9/2016-ST, dated 1st March, 2016 refers)

11.2 Rule 2(1)(d)(i) (D)(II) is being modified so that legal services provided by a senior advocate shall be on forward charge.

(Notification No. 19/2016-ST dated 1.03.2016 refers)

ANNEXURE-I

LIST OF CHANGES BEING MADE AND THE DATES ON WHICH THEY WOULD COME INTO EFFECT.

SUBJECT Para
B. With effect from 1st day of April, 2016
- Exemption on services by senior advocate to other advocate or to a law firm is being withdrawn. Levy under forward charge. 6.1

After a hue and cry was raised and the Bar Association(s), Senior Advocates moved the High Courts of Gujarat, Allahabad, Calcutta and Delhi, Stay was granted from operation of the said amendment.

To know more, see DDT 2820 & 2016-TIOL-675-HC-KOL-ST.

Also see DDT 2825 & F.No.276/91/2016-CX.8A

Apparently, to placate the Senior Advocates, the Central Government came out with notifications 32/2016-ST, 33/2016-ST and 34/2016-ST, all dated 6th June 2016 by which the services provided by the Senior Advocates was brought back under Reverse charge. Read DDT 2863.

It seems that the Supreme Court has transferred the petitions pending in various High Courts on the subject issue to the Delhi High Court.

When the matter was heard recently in the matter of the Delhi High Court Bar Association & Anr, the High Court was also informed that the situation that existed before the introduction of the Goods and Service Tax regime with effect from 1st July, 2017, which permitted Senior Advocates to pay service tax on reverse charge basis has continued under the GST regime as well.

The High Court, therefore, observed - If the Respondents do not intend to enforce any demand of service tax vis-a-vis the Senior Advocates for the period prior to 1st July, 2017 then the issue in these petitions would be rendered academic.

To this observation, the Counsel for Revenue stated that he would seek instructions.

The Bench, therefore, listed the matter on the 18 September 2017.

In passing: Incidentally, the three notifications (supra) since not retrospective, the tax liability for the interregnum period from 1st April 2016 to 5th June 2016 also awaits a solution.

(See 2017-TIOL-1702-HC-DEL-ST)


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