The goods and services tax is applicable to lawyers and legal firms in India, on condition basis. While GST is levied on certain legal services, some other law services are free of tax. Let’s analyze the applicability and impact of GST on the legal community of India.`
GST rate on legal services and advocates is 18% with full ITC (input credit) available.
Tax on Legal Services – Before GST
Before the implementation of GST, service tax was applicable for legal firms in the following manner.
Service tax was chargeable on the legal services offered by Senior Advocates to Advocates/ firm of advocates or Business entities. Senior Advocates charge service tax on these services and forward it to the government. There was no service tax on other senior advocate services.
However, services provided by individual advocates or legal firms were taxed under reverse charge mechanism. It means the receiver of the legal service had to pay service tax on the cost of service directly to the government.
GST on Lawyers and Legal Services
The goods and service tax (GST) system, which was implemented in India on July 1, 2017, effectively replaced service tax and other indirect taxes.
GST is chargeable on legal services (and advocates) according to the following conditions:
Any individual advocate or senior advocate or firm of advocates providing legal services to a business entity, whose annual turnover is above 20 lakhs, will charge GST on such services.
GST is also leviable on the legal services provided by a senior advocate to any other advocate or legal firm.
|
GST Applicability |
Sr Advocate |
Advocate |
Legal Firm |
|
Businesses with turnover 20 lacs or more |
Yes |
Yes |
Yes |
|
Businesses with turnover less than 20 lacs |
No |
No |
No |
|
Individual person |
No |
No |
No |
|
advocate/ firm of advocates |
Yes |
No |
No |
GST is not chargeable on the following advocate services.
When an individual advocate (not a senior advocate) or a firm of advocates provide legal services to another advocate or firm of advocates; or An individual person not representing a business entity; or A business entity whose annual turnover is not more than 20 lacs, GST will not be levied on such services.
When a senior advocate provides legal services to any individual who is not a business entity or to a business entity whose annual turnover is not more than 20 lacs, GST is not applicable to such services.
GST is chargeable under RCM on the following services:
Legal services provided by an advocate, a senior advocate or a firm of advocates, directly or indirectly, to a company situated in the taxable territory are taxable under the reverse charge mechanism. That means the GST on legal services will to be paid by the business entity directly to the government.
As you can see, the applicability of GST on legal services is more or less the similar as in the service tax regime.
