New notifications issued - service tax leviable under
reverse charge on representational services provided by Senior
In terms of the Finance Act, 2016, w.e.f. April 1, 2016, service
tax on "legal services" provided by senior advocates was
made exigible to service tax under forward charge basis. However,
various high courts have stayed the operation of such provision. In
view of the above, the Central Government has issued three separate
notifications i.e. 32, 33 & 34 (all dated June 6, 2016),
amending the relevant provisions of law; thereby bringing the
payment of service tax on "representational
services" provided by senior advocates under reverse
charge in the hands of the litigant, applicant or petitioner, as
the case may be.
The gist of the notifications are as under:
Notification No. 32/2016-ST:
This notification amends Notification No. 25/2012-ST, dated June
20, 2012, to exempt "legal services" provided by a senior
advocate by way of legal services to non- business entity; or a
business entity with a turnover up to rupees ten lakh in the
preceding financial year.
Notification No. 33/2016-ST:
This notification amends the Service Tax Rules, 1994. By way of
the said amendment, service tax is to be paid by the recipient of
service (i.e. litigant) in cases where a senior advocate is engaged
by another lawyer/ law firm.
Notification No. 34/2016-ST:
This notification amends Notification No. 30/2012-ST dated June
20, 2012, to stipulate 100% payment of service tax by the recipient
of representational service provided by senior advocate.
It is worthwhile to mention that the aforesaid notifications
have used the expression "representational services" and
"legal services". Thus, on a clear reading of the
notifications, it appears that only the representational services
have been brought under reverse charge.
Further, there is no clarity vis-ŕ-vis person liable to
pay service tax in relation to "legal services" provided
by senior advocates. It appears that the intention of the
Government is to retain the levy of service tax under forward
charge vis-ŕ-vis "legal services" (i.e.
consultancy) provided by senior advocates.
It is to be noted that the aforesaid amendments are operative
from June 6, 2016. Albeit the amendment, the levy of service tax
under forward charge for the interim period (i.e. April 1, 2016 up
to June 5, 2016), has been challenged in appeal by the Central
Government before the apex court.
Considering that the high courts have stayed the operation of
payment of service tax under forward charge; going forward, the
payment of service tax on "legal services" provided by
senior advocates will still get covered under the ambit of stay,
since the Hon'ble Delhi High Court has, while granting the
stay, restored the payment under reverse charge method.
In the event, the apex court vacates the stay and decides the
matter in favour of the department, then service tax for the
interim period would be required to be paid under forward charge by
the senior advocates, since there is no clarification provided with
regard to the period under dispute. In addition thereto, service
tax on "legal services", in absence of any clarification,
would also get covered under forward charge and hence, service tax
will be liable to be deposited by the senior advocates.
Instead of resolving the issue, the Government has created more
confusion. Hopefully, the Board understands the muddle created and
clears the mist by plainly restoring the levy of service tax under
reverse charge in its entirety.
The content of this article is intended to provide a general
guide to the subject matter. Specialist professional advice should
be sought about your specific circumstances. The views expressed in
this article are solely of the authors of this article.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Cummins Inc. is a foreign company, rendering services in respect of desktop/laptop software license and internet mail facilities to its Indian associated enterprises, i.e. CIL and CSSL which were paying IT charges provided by the taxpayer.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).