New Delhi: Union finance ministry on Sunday said that the business clients are liable to deposit GST with the government for legal services availed by them from lawyers and law firms.
“...... legal services, which includes representational services, provided by advocates are under reverse charge (under GST),” said the finance ministry.
Normally supplier of a service or goods is liable to deposit tax to the government. However, under “reverse charge” under specified circumstances in GST the person who buys a service or good will have the liability to pay tax directly to government like when a business buys goods or services from a supplier who is not registered to pay GST. It is done to introduce more tax compliance.
GST of 18 per cent is applicable on legal services availed by businesses with a turnover above Rs 20 lakh. However, such services taken by individuals and smaller businesses are exempt from the indirect tax.
The finance ministry said that legal service has been defined to mean any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.
It said that there are points being raised about the applicability of GST on legal services provided by advocates — whether it is in forward charge or reverse charge.
Meanwhile, the 19th meeting of GST Council will be held through video conferencing on Monday. This will be the first meeting of the Council since the launch of GST on July 1 to take stock of the implementation of the new indirect tax.
Reverse Charge
Normally supplier of a service or goods is liable to deposit tax to the government. However, under “reverse charge” under specified circumstances in GST the person who buys a service or good will have the liability to pay tax directly to government like when a business buys goods or services from a supplier who is not registered to pay GST.
18% GST is applicable on legal services availed by businesses with a turnover above Rs 20 lakh.
