Legal consultancy fees are a crucial component of legal services, and understanding the GST implications on such fees is vital. Goods and Service Tax applies to legal services and legal service advocates. As per the GST Act, legal services offered by advocates, including senior advocates, are categorised as service supplies and are subject to GST. The GST rate applicable to legal services is 18%, and it is levied on the entire fee charged by the advocate, covering charges for appearances, document drafting, and legal consultations. This article delves into the intricacies of GST as it applies to legal consultancy fees in India, shedding light on the regulatory framework, applicable rates, and exemptions pertinent to this critical aspect of the legal profession.
Definition of Legal Services under GST
Legal services are precisely defined under entry 2 (zm), notification number 12/2017 – Central tax (rate), dated June 28, 2017, which is outlined below:
Legal services involve representation before any court, tribunal, or authority. They also cover services related to guidance, consultancy, or assistance in any legal domain.
The rate of GST applied to legal services is 18%, levied on the total fee charged by the advocate. This fee includes charges for appearances, drafting of legal documents, and legal consultations.
GST Registration Requirements for Advocates and Legal Services
Threshold Limit:
Advocates and legal service providers must register for GST when their aggregate turnover exceeds Rs. 20 lakh in a financial year.
Inter-State Supply:
If these service providers offer their services to clients in different states, they must register for GST, regardless of turnover.
Voluntary Registration:
Advocates and legal service providers can voluntarily register for GST, irrespective of whether their turnover exceeds the threshold limit. This voluntary registration offers a significant advantage: it will enable them to claim an input tax credit for the GST paid on inputs and services.
Reverse Charge Mechanism:
If an advocate or legal service provider renders services to a business organisation registered under the GST law, the responsibility for paying GST is shifted to the service recipient through the reverse charge mechanism.
In such cases, the advocate or legal service provider might not need to obtain GST registration, as the GST liability falls on the service recipient.
GST Exemptions for Advocates, Senior Advocates, and Firms of Advocates
Within India’s GST (Goods and Services Tax) framework, certain exemptions are extended to advocates, senior advocates, and advocate firms. These exemptions encompass the following:
Threshold Limit Exemption:
Advocates or advocate firms with a combined turnover of less than Rs. 20 lakh in a fiscal year are not obligated to register for GST. This exemption pertains explicitly to services provided to individuals and does not extend to businesses.
Services to Senior Advocates:
When a senior advocate offers legal services to another senior advocate, such services are exempt from GST.
Services to Individuals:
If the fee for Legal Services provided by advocates or senior advocates is below Rs. 1,000 per day, they are exempted from paying the GST.
Services to Courts or Tribunals:
Services delivered to a court or tribunal by advocated or senior advocates are exempt from GST.
Services to Government:
Legal services provided by advocates, including senior advocates, to the government, local authorities, or specified persons are also exempt from GST.
GST Rates and HSN/SAC Codes for Legal Services
In compliance with the GST regulations in India, legal services provided by advocates, encompassing senior advocates and advocate firms, are categorised under the Service Accounting Code (SAC) 998212. The applicable GST rate for these legal services is 18%. Here are the GST rates and HSN/SAC codes for various standard legal services offered by advocates.
Legal Consultancy:
HSN/SAC – 998212
GST Rate – 18%
Drafting of Legal Documents:
HSN/SAC – 998212
GST Rate – 18%
Representation before any Court, Tribunal, or Authority:
HSN/SAC – 998212
GST Rate – 18%
Arbitration Services:
HSN/SAC – 998213
GST Rate – 18%
Conclusion
Legal services, including those provided by advocates and senior advocates, fall within the purview of GST regulations. The GST rate applicable to these services is 18%, covering the entire gamut of services offered by legal professionals, from appearances to document drafting and legal consultations. The definition of legal services under GST encompasses representation before various legal bodies and expert guidance across legal domains.
Additionally, the GST registration requirements for advocates and legal service providers depend on factors such as their aggregate turnover, inter-state activities, and Voluntary registration options. Exemptions exist for specific scenarios, including a threshold limit exemption for lower turnovers and services to senior advocates, individuals, courts, tribunals, and government entities.
The HSN/SAC codes for legal services are categorised under SAC 998212, with an 18%. GST rate. Legal consultancy, drafting of legal documents, representation before legal bodies, and arbitration services all fall under this classification. This article has provided comprehensive insights into the multifaceted aspects of GST on legal consultancy fees, offering a clear understanding of its implications for the legal profession in India.
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Frequently Asked Questions(FAQs)
1. What is the GST rate on legal consultancy fees in India?
The GST rate applicable to legal consultancy fees is 18%.
2. Who can pay GST on legal services, the advocate or the client?
The advocate or legal service provider is liable to pay GST on the total fee charged, including fees for appearances, document drafting, and legal consultations.
