As the Government is all set to roll out the Goods and Services Tax Act from 1st July, the 16th Meeting of the GST Council held at New Delhi decided to exempt Advocates, including Senior Advocates from obtaining CGST Registration under section 23(2) of the Central Goods and Services Tax Act, 2017.
Services provided by the Senior Advocates, which were brought under the tax net in the year 2016 was continued to be taxed under the GST regime. However, the services provided to any person other than a business entity and a business entity having a turnover of below 20 lakhs are out of the ambit of GST.
1. Under GST services provided by advocates are exempt as follows.
Services provided by
(a) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; or
(b) a senior advocate by way of legal services to-
(i) any person other than a business entity; or
(ii) a business entity up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. Therefore, legal services provided to a business entity having turnover exceeding Rs 20 lakhs is not exempt.
- Under GST advocates providing legal service to any business entity having turnover exceeding 20 lakhs are not liable to pay GST but GST will be payable by business entity under RCM. under
- It means legal services provided by Advocates to any business entity having turnover exceeding 20 lakhs is a taxable supply.
- Now we consider case of non-senior advocate. He has receipts from legal services as
(a) From individual advocates/ advocate firms Rs 1000000 [Exempt supply]
(b) From business entities having turnover below 20 Lakhs Rs 500000 [Exempt supply] (c ) From business entities having turnover above 20 Lakhs Rs. 1000000 [ Taxable supply but tax payable under RCM by business entity]
- By definition “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess. So in this case aggregate turnover of advocate will be 2500000 which is above the threshold of Rs. 2000000 provided in section 22.
- Now as per section 22 every supplier shall be liable to be registered under theAct in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees.
- Since in the given case advocate is having aggregate turnover of Rs 2500000 and he makes taxable supply which is chargeable under RCM hence advocate will be required to take registration under the Act.
- Since they become registered person by virtue of section 9(4) they will be required to pay tax under RCM on goods or services procured from unregistered persons.