GST - No coercive action be taken against any lawyer or law firms for non-compliance with any legal requirement under CGST/IGST/DGST Act: Delhi HC
By TIOL News Service
NEW DELHI, JULY 14, 2017: THE petitioner is a proprietary concern of which Mr. J. K. Mittal, Advocate, is the Sole Proprietor. The Petitioner states that he provides legal services including consultancy, opinion, drafting, appearances before Courts etc.; that although he has an office only in Delhi, he represents his clients throughout the country before various High Courts and Tribunals outside Delhi.
The grievance is that contrary to the recommendations of the GST Council held on 19th May, 2017 and on 11th June 2017, Notification No. 13/2017-Central Tax (Rate) dated 28th June, 2017 as well as Notification No. 13/2017-State Tax (Rate) dated 30th June, 2017, have been issued respectively and which are per se in violation of the CGST Act, 2017 the DGSTAct 2017 r/w Article 279 A of the Constitution of India and have adverse consequences to lawyers in general including himself.
Inasmuch as the constitutional validity of the aforesaid notifications is challenged.
The petition also challenges Notification No. 5/2017-Central tax dated 19th June, 2017 issued by the Union of India and Notification No. F3(10)/Fin(Rev-I)2017-18/DS-VI/340 dated 22nd June, 2017 issue by the GNCTD essentially on the ground that these notifications are contrary to the recommendations of GST Council.
The petition also challenges the constitutional validity of Section 9 (4) of CGST Act, Section 5(4) of The Integrated Goods and Services Tax Act, 2017 (IGST Act) and Section 9 (4) of DGST Act.
It is pointed out that these provisions were not to be found in the model laws prepared by the GST Council. Inasmuch as it seeks to collect GST on 'reverse charge' basis from a person registered under the CGST Act, IGST Act or DGST Act in respect of goods supplied and services received by such person from a person who has not been so registered.
The petitioner submits that this provision lacks a proper corresponding machinery provision to facilitate its implementation, and is therefore ultra vires the statute;that this provision is incapable of being complied with and is bound to cause undue hardship to the persons registered under the aforementioned three statutes.
The categorical averment is that the impugned notifications are in violation of the mandatory statutory requirement inasmuch as the GST Council had recommended that legal services as a whole would be amenable to GST only on 'reverse charge' basis.
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Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity.
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An individual advocate including a senior advocate or firm of advocates.
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Any business entity located in the taxable territory.
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The case of the petitioner is that the expression "provision of such services" following the expression "located in the taxable territory" (supra notification 13/2017) restricts the exemption to only 'representational services' provided by a legal practitioner before any court, tribunal etc. and not to all legal services provided by such legal practitioner or a firm.
Furthermore, the petitioner had, in compliance with the provisions of the FA, 1994 got himself registered way back in 2011 as service providers but after a period of about six months the provision of legal services was notified as being taxable under 'reverse charge' basis. However, there was no provision in the FA to allow for de-registration and, therefore, the registration continues.
Inasmuch as Section 22(2) of the CGST Act, reads -
"22 (2) Every person who, on the day immediately preceding the appointment day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day."
And, therefore, the mere clarification that all legal services are amenable to GST on reverse charge basis may not solve the petitioner's problem; that a legal practitioner like himself who is already registered under the FA would have to be exempted from registration under the GST laws under Section 23 (2) read with Section 22 (2) of the CGST and the corresponding provisions of the IGST Act and DGST Act.
After considering the submissions, the High Court observed thus -
"14. …it is plain that as of date there is no clarity on whether all legal services (not restricted to representational services) provided by legal practitioners and firms would be governed by the reverse charge mechanism. If in fact all legal services are to be governed by the reverse charge mechanism than there would be no purpose in requiring legal practitioners and law firms to compulsorily get registered under the CGST, IGST and/or DGST Acts. Those seeking voluntary registration would anyway avail of the facility under Section 25 (3) of the CGST Act (and the corresponding provision of the other two statutes). There is therefore prima facie merit in the contention of Mr Mittal that the legal practitioners are under a genuine doubt whether they require to get themselves registered under the three statutes. In the circumstances, the Court directs that no coercive action be taken against any lawyer or law firms for non-compliance with any legal requirement under the CGST Act, the IGST Act or the DGST Act till a clarification is issued by the Central Government and the GNCTD and till further orders in that regard by this Court."
The matter is directed to be listed on 18th July 2017.
(See 2017-TIOL-1290-HC-DEL-GST)
