Service Tax on Legal Consultancy Service

Service Tax on Legal Consultancy Service

Legal service refers to all kinds of services in relation to advice, consultancy, and assistance related to any branch of law and includes representational services before any court, tribunal or authority. Service tax was first introduced on ‘Legal Consultancy Service’ from 01.09.2009 by the Finance (No.2) Act, 2009 by inserting clause (zzzzm) in Section 65 (105) of the Finance Act, 1994.

As per Notification No.25/2012- Dated- 20th June 2012 , legal service tax is exempt if service is provided by,-

As per notification no. 30/2012 dated 20.06.2012, any legal service was given by an advocate or a firm, the service tax must be paid by the service receiver under reverse charge mechanism.

(a) a tribunal to-

(i) anyone exempting a business entity

(ii) A business entity with a turnover up to rupees ten lakh in the preceding financial years

(b) an individual advocate or a law firm

(i) an advocate or a firm providing legal service

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) a person represented on an arbitral tribunal to an arbitral tribunal;

Reverse charge service would also mean that tax is payable at the time of payment and not at the time of receiving an invoice. If payment is not made within six months, then tax is payable along with the interest.

The CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient. However, service tax discharged under reverse charge on legal service can be used as CENVAT credit for discharging the service tax liability on output taxable services and Central Excise duty.

Reverse charge service compels the service receiver to pay the service tax instead of the service provider.