LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Payment made to advocate- liability to service tax

harshada (4164) (37 Points)

26 November 2012

In Case of services provided by individual advocates company needs to pay service tax on reverse charge mechanism w.e.f. 01/07/2012.

My query is what will be the point of taxation if payment to advocate is made in the month of july 2012, but invoice was raised in month of april 2012?

whether ther will be any tax liability on company in this situation?

Reply
Follow
Share

6 Replies

CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 26 November 2012

Dear Harshada,

The Finance Act, 2012 has made paradigm shift in levy of service tax from selective list of taxable services to all encompassing activities except the exclusions from definition of service, Negative list and Exemptions provided in the exemption notification. However, the Government has exempted service by an individual advocate or a partnership firm of advocates (Notification No. 25/2012 – ST dtd. 20.06.2012) 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 upto Rs. 10 Lakhs in the preceding financial year.

“Legal service” is 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.

“Business entity” is defined to mean any person ordinarily carrying out any activity relating to industry, commerce or any other business.

In respect of services provided by an individual advocate or a firm of advocates by way of legal service to a business entity located in taxable territory, such business entity is liable to whole of service tax (Notification No. 30/2012 – ST dtd. 20.06.2012) under reverse charge.

Thus, the individual advocates or a partnership firm of advocates providing legal service are not liable to pay service tax under any circumstance and in case of service provided to the business entities having turnover above Rs. 10 Lakhs in the preceding financial year, such business entities are only liable to pay tax. However, for legal service provided or agreed to be provided to business entities located outside India where place of provision of service is within the taxable territory (As determined under Place of Provision of Service Rules, 2012 (‘PPSR’ for brevity)), the advocate or firm of advocates is liable to pay tax.

For example, an advocate or firm of advocates gives report on title of landed property situated in India to a business entity having turnover of above Rs 10 lakhs in the pervious financial year. In this case, place provision of service is within the taxable territory (Rule 5 of PPSR) & the receiver of service is located outside India. The service is not an exempt service & reverse charge cannot be applied and therefore the advocate or firm of advocate is liable to pay the tax which he may recover from service recipient. Hence there is no tax liability on company

All the best.

Regards,

RAJESH CHOUDHARY

srinivasan (service) (898 Points)
Replied 26 November 2012

When the service has been rendered and invoice is also raised. The pot is the date of issue of invoice as per rule 3. Therefore this transaction will not be covered under reverse charge. This position has also been clarified in the guidance note in para10.1

1 Like

srinivasan (service) (898 Points)
Replied 26 November 2012

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 27 November 2012

Here the POT is date of actual payment in July. Not the date of credit of payee in ledger books.

Aditya (CHARTERED ACCOUNTANT) (179 Points)
Replied 28 November 2012

Originally posted by : harshada
	In Case of services provided by individual advocates company needs to pay service tax on reverse charge mechanism w.e.f. 01/07/2012. My query is what will be the point of taxation if payment to advocate is made in the month of july 2012, but invoice was raised in month of april 2012? whether ther will be any tax liability on company in this situation?

whether every business house who is selling goods only and paying legal fees on account of sales tax , income tax matters to advocates have to take STC and pay Service tax

Aditya (CHARTERED ACCOUNTANT) (179 Points)
Replied 28 November 2012

whether every business house who is selling goods only and paying legal fees on account of sales tax , income tax matters to advocates have to take STC and pay Service tax