News Update

German elections - Merkel captures powers for 4th timeFM assigns task to Chief Economic Adviser to finalise booster dose for economyPetrol prices will be reduced shortly, says Petro MinisterHealth Minister thanks PM for approving AIIMS at Bilaspur in HPCII favours further extension of GSTR-1, 2 & 3Thread of Mann Ki Baat integrates every section of society: PMCommerce Minister meets top honchos of Korean MNCsGSTR - 3B for July if submitted but not FILED can be done now: GSTNMumbai Customs organising Half Marathon from Ballard Estate on FridayFM says Chief Economic Adviser Arvind Subramanian’s tenure to be extended till Oct, 2018Income Tax conducts search at premises of S M Krishna's son-in-law who heads CCD GroupPak troops shoot at BSF posts in J&K; 5 injuredGST on 'out and out' transactions (See 'TOG Insight' in Taxongo.com)Whether due date for submission of GST TRANS-1 is really extended?Illegal income tax raids - Govt advises taxpayers to inspect warrants of searchesCII calls for 1% interest rate cut for job creationAffordable housing - Industry takes up GST issue with GovtIncome Tax - Provisions of Sec 115O do trench on powers of State Legislature to tax agri income but such incidential trenching does not warrant annulment of legislation: Supreme CourtGST - Govt notifies new rates for Duty Credit Scrips, saree falls, roasted grams and many other items + restriction on refund for corduroy fabrics + exemption to khadi fabric, musical instruments and many other items + clarity on issue of cereals etc sold in unit container with brand nameJuly GSTR-3B can now be edited and submitted: GSTNBlockage of Exporters' working capital - Govt exploring link between GSTR-1 & GSTR-3B Govt grants conditional IGST exemption to skimmed milk powder or concentrated milkCBI arrests Mumbai DCIT in alleged Rs 3 Crore corruption caseSC favours creation of portal to attend to home buyers’ grievancesNPPA notifies ceiling price exclusive of GST for 7 drugs including Rifabutin & Hepatitis B ImmunoglobulinCentral Govt notifies Porbandar Wildlife Sanctuary as Eco-sensitive zone; Industries not allowed in its surroundingsYogi Adityanath’s resignation from Lok Sabha notified to be valid from Sept 21, 2017New Drawback Rules, 2017 and AIR of Drawback explainedWealth Tax - Amendment made to Sec 40(3) vide FAs 1983 & 1988 is substantive in nature and that is why it cannot be retrospective: HCI-T- Simply because Writ Court has struck down previous transfer order u/s 127(2)(a), Department is not precluded from initiating fresh procedure: HCGST - Rs 65k Cr TRANS-1 Credit is much less than Rs 1.3 lakh crore as closing balance: GovtDoT finalises guidelines for settlement of claimsNITI, IRF Geneva sign pact in field of Intelligent Transport SystemsCBI nabs former HC Judge in medical admission scamGSTN informs that portal for uploading application seeking advance ruling to be ready only in Jan 2018 - HC questions authority for postponementCBEC makes many amendments in Drawback Rules; excludes many items from list of eligible goods + lists out goods where no drawback is to be determined; New rates to come in force from Oct 1, 2017I-T - Settlement Commission has no authority to review / reopen matters already concluded before it: HC
 
Requirement to obtain registration: Legal Services

SEPTEMBER 01, 2017

By Rajat Dosi, Partner, RSA Legal Solutions

WITH the issuance of Press Release dated 15.07.2017, it appears that much drama over taxing of legal services provided by an advocate / a law firm and consequential requirement to obtain registration under the GST law has been put to rest by the Government clarifying the scope of legal services under the reverse charge mechanism. However, there is still once facet of the same left, which may lead to un-warranted consequences. This article highlights this facet, which may have an impact on a number of law firms operating in India.

Notification No. 13/2017-CGST dated 28.06.2017 specifies the various supplies which shall be subject to payment of GST by the recipient of service (reverse charge mechanism). Sl. No. 2 of this notification, in essence, provides that in case of legal services provided by an advocate (including a senior advocate) and a law firm, to a business entity, the applicable GST will be paid under reverse charge by the receiver of service i.e., the said business entity. Additionally, legal services provided by an advocate and a law firm to person other than business entity is exempt from payment of applicable GST under Sl. No. 45 of Notification No. 12/2017-CGST dated 28.06.2017.

Given the above, there seems to be a notion that no registration is required by an advocate and law firms under the GST regime, in terms of Section 23 of the GST Act [It inter alia provides that no registration is required to be taken by person who are providing exempt services] read with Notification No. 5/2017-CGST dated 19.06.2017 [It provides that no registration is required to be taken by persons who are exclusively providing services which are subject to GST under the reverse charge mechanism]. However, this notion may not be correct in entirety. There is still an area wherein an advocate or a law firm may be required to take registration. It is when they are providing legal services to a person / business entity located outside India and receiving payment in foreign exchange i.e., in case of export of legal services.

In the above context, Section 7 of the IGST Act inter alia provides that supply of services wherein the supplier is located in India and the place of supply is outside India, shall be deemed to an inter-state supply. In case of legal services provided by an advocate / a law firm to a business entity located outside India, the place of supply will be outside India (default rule being location of recipient of legal service [In terms of Section 13(2) of the IGST Act]). Therefore, export of legal services by an advocate / a law firm will be deemed to be an inter-state supply of services under the GST regime.

Section 24 of the CGST Act, in this regard, mandates that every person making inter-state supply of goods is required to take registration under the GST regime. Therefore, in the above background, an advocate / a law firm providing legal services to business entities outside India (or export of legal services) will be liable to take registration under the CGST and SGST Act.

The reverse charge notification does not apply in this context as the same is applicable when legal services are provided to a business entity located in a taxable territory. It will not apply to a situation wherein they are provided to a business entity located in a non-taxable territory. Therefore, export of legal services will be subject to payment of applicable GST by the advocate / law firm.

Here, it will be pertinent to point out that export of legal services will tantamount to 'zero rated supply', therefore on such supplies such advocate / law firm will have the option of either:

1. Paying applicable IGST on such export of legal services and thereafter apply for refund; or

2. Export such services without payment of applicable IGST under bond / LUT (to be executed with the department).

This requirement to take registration will be applicable on a number of law firms operating in India who are providing legal services to their various clients located outside India and are receiving payment in foreign exchange.

Apart from the above, the registration requirement may invite other unwarranted consequences as well, such as being a registered person if they are getting any goods or services from an un-registered person, they being registered person will be liable to pay applicable GST on such goods and services under the reverse charge mechanism. These consequences will be over and above the return filing requirement cast under the GST regime, which most of the law firms are not quite used to (as it was not required of them, under the erstwhile service tax regime).

GST Rollout - 6 Weeks After | simply inTAXicating

GST: Ek Desh Ek Kar | Episode 1

GST Rollout - One Week After | simply inTAXicating

Also See : TIOL TUBE Videos on GST

 

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

 


POST YOUR COMMENTS
   

TIOL Tube Latest

GST: एक देश एक कर | गोष्ठी - संस्करण ३