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Reverse charge mechanism in legal services

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Rohit Gupta

Audit Executive

271 Points Posted on 02 February 2014

In case of Legal Services of Advocate or Advocate Firms, reverse charge mechanism is applicable w.e.f. 1-7-2012 i.e. service tax is payable wholly by service receiver if service provider is Individual Advocate or Advocate Firms and the service receiver is Business Entity having turnover exceeding ten lakhs per annum, located in taxable territory.

However, High Court of Delhi vide order dated 21.09.2012 has stayed the implementation of this amendment in a petition (W.P.(c) No. 5957/2012) led Mr. A.S.Chandhiok, Sr. Adv. with Mr. Ruchir Bhatia, Adv. for Delhi Tax Bar Association.Next Hearing was scheduled to take place on 27.11.2012.

I would like to know the current status that whether the service tax is required to be paid by the service receiver on the above services on reverse charge basis or not? In brief i want to know what happened in the further hearings and what is the most latest status of this???

Replies (1)

Rohit Gupta

Audit Executive

271 Points Posted on 04 February 2014

As per the advice given by the V.S. Datey Sir even in case it is stayed by the High Court we should continue to pay the Service Tax on reverse charge basis on legal services if we are in a position to avail the Cenvat credit of it. As if afterwards the service tax liability arises, then the department will charge the amount of service tax as well as the amount of interest on it. On amount of interest no cenvat will be available. So better to pay and take the benefit of it.