Reverse charge mechanism on legal service
Querist : Anonymous
Querist : Anonymous
1. Legal Services under Reverse Charge
Are legal services liable to service tax under Reverse Charge?
Yes, legal services provided by an Advocate or a firm of Advocates are covered under reverse charge mechanism.
What does this mean?
When you, as a company or business entity, receive legal services from an individual advocate or an advocate firm, you (the recipient) are liable to pay Service Tax under reverse charge.
The advocate or advocate firm does not charge Service Tax on their invoice.
Instead, the recipient of the legal service has to pay the Service Tax directly to the government and can claim CENVAT credit if eligible.
Why?
Legal services provided by individual advocates or firms are specifically notified under Service Tax rules for reverse charge because individual advocates are exempted from Service Tax registration (under certain conditions).
2. Fees Charged by Chartered Accountant for VAT Assessment
The service provided by a Chartered Accountant (CA) for VAT assessment is considered a professional service.
Is this service liable to RCM?
No, professional services provided by a CA do not generally attract Reverse Charge on the recipient under Service Tax rules.
If the CA is registered under Service Tax and charges service tax on the invoice, then the CA will pay tax normally (forward charge).
What about the additional qualification of LLB?
The LLB qualification of the CA does not change the taxability of the service.
Legal services and professional services (like CA services) are separately classified for Service Tax purposes.
Summary Table:
Service Type Reverse Charge Applicable? Notes
Legal services by advocate or advocate firm Yes Recipient pays Service Tax under RCM
CA fees for VAT assessment No CA charges service tax normally (forward charge)
CA with LLB qualification No change Qualification doesn't affect RCM
Key Point:
Under Service Tax law (pre-GST), legal services by advocates (individuals/firms) attract reverse charge, while services by Chartered Accountants, including VAT assessment services, do not attract reverse charge.
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