Services covered :- Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly.
Explanation :- "legal service" means 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.
Supplier :- an individual advocate including a senior advocate or firm of advocates
Recipient :- Any business entity located in taxable territory.
Legal services provided by an individual advocate including a senior advocate or firm of advocates are covered under RCM in certain situations. Further there is an exemption available to such services in certain cases. As there are many legs of taxability of this service, it becomes important to discuss this service at length for proper clarity.
Meaning of Advocate and lawyer
Let us first understand the meaning of Advocate and senior advocate.
Question also arises as to whether advocate and lawyer are same or not.
As per Para 2(b) of Notification No. 12/2017 - Central Tax (Rate), "Advocate" has the same meaning as is assigned to it in clause (a) of sub- section (1) of section 2 of the Advocates Act, 1961 (25 of 1961).
As per this section, "Advocate" means an advocate entered in any roll under the provisions of this Act (Section 2 (a) of Advocates Act,1961) and "Roll" means a roll of advocates prepared and maintained under this Act. (Basically a person whose name is entered in register of advocates prepared and maintained by Bar Council)
"Senior Advocate" means an advocate who may be designated as senior advocate if Supreme Court is of the opinion that by virtue of his ability or standing at Bar or special knowledge or experience in law and he is deserving of such distinction.
Hence, we can understand the distinction between lawyer and advocate as this- Advocate is a lawyer whose name is entered in register of advocates maintained by Bar Council. Lawyer is a law graduate who may or may not be an advocate.
So we can say that all advocates are lawyers, but all lawyers may not be advocates.
Meaning of business entity
The term "business entity" is defined under Notification No. 12/2017- Central Tax (Rate), Explanation (n).
The notification defines a "business entity" as :-
"Business entity" means any person carrying out business.
This definition is quite broad and covers all types of persons engaged in business activities. Since GST law follows a wide definition of "business", let's analyze what this means practically.
To interpret "business entity", we must refer to the definition of "business" under Section 2(17) of the CGST Act, 2017. It includes:
Trade, commerce, manufacturing, profession, vocation, or similar activities- whether carried out for profit or not.
Activities related to the supply of goods or services-including those carried out by:
Companies
Partnership firms
Sole proprietors
Trusts and societies if engaged in commercial activities
Any activity undertaken in connection with the commencement, closure, or expansion of a business.
Services provided by clubs, associations, or societies to their members (mutuality concept).
Services provided by any government authority in the course of business activities.
Meaning of taxable territory
Meaning of "Taxable Territory" Under GST
The term "taxable territory" is defined under Section 2(109) of the CGST Act, 2017, which states:
"Taxable territory" means the territory to which the provisions of this Act apply."
Since GST is a destination-based tax applicable across India, this means that the taxable territory under GST covers the entire geographical area of India.
Further, the term "India" is defined under Section 2(56) of the CGST Act, 2017, and includes :-
The landmass of India
Its territorial waters (up to 12 nautical miles from the coastline)
The seabed and subsoil underlying territorial waters
The airspace above its territory
Exclusive Economic Zone (EEZ) and the Continental Shelf (up to 200 nautical miles from the baseline) where India has exclusive rights for exploration and use of marine resources
Exemptions available to advocates
Entry no 45 of notification no 12/2017-CTR following services provided by advocates is exempt -
Services provided by :-
a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-
an advocate or partnership firm of advocates providing legal services;
any person other than a business entity; or
a business entity with an aggregate turnover up to such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act,
the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity
a senior advocate by way of legal services to :-
any person other than a business entity; or
a business entity with an aggregate turnover up to such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act,
the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity
As mentioned above, under Notification No. 12/2017-Central Tax (Rate), Entry 45, certain legal services provided by advocates, senior advocates, and law firms are exempt from GST. The exemption applies in the following cases :-
Legal services provided to an individual or non-business entity for personal matters such as family disputes, property disputes, or consumer grievances. Since these recipients are not business entities, GST is not applicable, and the advocate is not required to charge GST.
Legal services provided to the government (Central Government, State Government, Union Territories, or local authorities) are exempt from GST.
Legal services provided by an individual advocate or a law firm to another advocate or another law firm are also exempt from GST. This ensures that legal services remain tax-free when they are subcontracted within the legal fraternity.
Exception :- Services provided by a Senior Advocate to another advocate or law firm are NOT exempt from GST. As per Notification No. 12/2017-CTR, Entry 45, legal services provided by a Senior Advocate to another advocate or a firm of advocates are taxable. Further the senior advocate needs to discharge GST liability under forward charge on this service.
Additionally, advocates and law firms are not required to register under GST if they exclusively provide exempt legal services or services covered under RCM.
Explanation on Reverse Charge Mechanism (RCM) on Advocate Services
Explanation on Reverse Charge Mechanism (RCM) on Advocate Services
As per Notification No. 13/2017-Central Tax (Rate), Entry 2, legal services provided by individual advocates (including senior advocates) or firms of advocates to a business entity located in India are liable for GST under Reverse Charge Mechanism (RCM). This means that:
The recipient business entity is responsible for paying GST at 18%, instead of the advocate or law firm charging GST.
If a law firm provides legal services, including consultancy, drafting, and representation, RCM applies to all such services provided to a business entity.
The advocate or law firm does not need to collect GST or file GST returns, as the responsibility to pay tax lies with the business entity.
This mechanism ensures that advocates are not burdened with GST compliance and that only business entities receiving legal services bear the tax liability.
Examples :-
Example 1:- Legal Services to a Business Entity (RCM Applies)
Advocate A provides contract drafting and legal consultancy services to XYZ Ltd., a registered company.
Since XYZ Ltd. is a business entity, GST at 18% is payable under RCM by XYZ Ltd.
Advocate A does not charge GST, and XYZ Ltd. deposits the tax directly to the government.
Example 2 :- Representation in Court for a Business Entity (RCM Applies)
Senior Advocate B represents ABC Pvt. Ltd. in a tax litigation case before the High Court.
Since this is a representational service provided to a business entity, GST at 18% is payable under RCM by ABC Pvt. Ltd.
Senior Advocate B does not charge GST and does not need to register under GST.
Example 3 :- Legal Services Provided to an Individual (Exempt from GST)
Advocate C provides legal advice to Mr. Sharma for a family property dispute.
Since Mr. Sharma is an individual and not a business entity, the service is exempt from GST.
No GST is payable, and Advocate C does not need to charge GST.
Example 4 :- Legal Services to a Government Department (Exempt from GST)
Law Firm D provides legal services to a State Government department regarding administrative law matters.
Since the State Government is not engaged in business, the service is exempt from GST.
No GST is payable, and Law Firm D does not need to charge GST.
Example 5 :- Senior Advocate Providing Services to Another Advocate (Taxable under Forward charge)
Senior Advocate E provides legal opinions and case arguments for Advocate F, who is handling a corporate litigation case.
Since Senior Advocate E is providing services to another advocate, GST is applicable under RCM at 18%, and Senior Advocate E must pay the GST.
Let us summarise the provision as below -
Title
Title
Title
Title
Legal service provider (Supplier)
Recipient
Taxability
Forward charge or Reverse charge
Individual Advicate or firm of advocates other
than senior advocate
Advocate or firm of advocates
Exempt
NA
-do-
Non business entity or unregistered
business entity
Exempt
NA
-do-
Government local authority, Governmental Authority or Government Entity
Exempt
NA
-do-
Business Entity having turnover more than the threshold limit during preceding financial year
Taxable
Reverse Charge
Senior Advocate
Advocate or firm of advocates
Taxable
Forward Charge
-do-
Non business entity or unregistered business
entity
Exempt
NA
Title
Title
Title
Title
-do-
Government local authority, Governmental Authority or Government Entity
Exempt
NA
-do-
Business Entity having turnover more than the threshold limit during preceding financial year