RCM under Legal Services

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Bhavesh (Querist)
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14 April 2016 Hi Good Morning to all Can anyone tell about the recent changes related to RCM legal services under service tax. It's say rcm applicable on senior advocate/firm only. No rcm on otherthan above. How to identify senior advocate/firm? Your valuable feedback is important.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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14 April 2016 The provision in the Budget 2016, applies to services provided by Senior Advocates to Firm of Advocates / Advocate. There is no change in the provisions of RCM on Legal Consultancy / Arbitrial Services.

When a firm of Advocates are appointed, they often call you for conferences with Barristers / Senior Counsels. These counsels bill the firm of advocates and not the client. The firm then shows the Senior Counsel Charges in the clients bill as Out Pocket Expenses. Earlier the Senior Counsels used to bill just their professional fees which are very steep - maybe as high as 10/15 lakhs per appearance or 3/5 lakhs per conference, Now the Senior Counsel will also have to collect Service Tax from the firm of advocates up front, which means the services to teh client becomes costlier. The business entity receiving legal consultancy services still has to pay Service Tax under the Reverse Charge Mechanism.

Hope I have been able to clarify your doubts.

Bhavesh

Bhavesh (Querist)
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19 April 2016 Thank you very much sir for valuable clarification. RCM will be applicable to the business entity.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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19 April 2016 Yes the business entity will have to pay service tax as service recipient for Legal Consultancy / Arbitral Services.

Bhavesh

Bhavesh (Querist)
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21 April 2016 Ok, Thank you once again to u..

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