Legal consultancy fees are a crucial component of legal services, and understanding the GST implications on such fees is vital. Goods and Service Tax applies to legal services and legal service advocates. As per the GST Act, legal services offered by advocates, including senior advocates, are categorised as service supplies and are subject to GST. The GST rate applicable to legal services is 18%, and it is levied on the entire fee charged by the advocate, covering charges for appearances, document drafting, and legal consultations.
Definition of Legal Services under GST
Legal services are precisely defined under entry 2 (zm), notification number 12/2017 – Central tax (rate), dated June 28, 2017, which is outlined below:
- Legal services involve representation before any court, tribunal, or authority. They also cover services related to guidance, consultancy, or assistance in any legal domain.
- The rate of GST applied to legal services is 18%, levied on the total fee charged by the advocate. This fee includes charges for appearances, drafting of legal documents, and legal consultations.
Applicability of GST on Advocates, Senior Advocates & Firm of Advocates
GST Registration Requirement
GST registration is required if an advocate, senior advocate or firm of advocate provides legal services (exempt as well as taxable services) and he meets one or both of the below conditions:
- Turnover exceeds the GST registration threshold
- Tax is to be paid on forward charge
Also, if legal services are provided to a corporate body with turnover exceeding Rs 40 lakh, then GST is applicable on reverse charge basis.
Taxability of legal services:
- In case of individual advocate or firm of advocates: If service is provided to a corporate body with gross turnover exceeding the registration threshold. It is applicable on a reverse charge basis.
- In case of senior advocate: If service is provided to-
- Individual advocate or firm of advocates
- Senior advocate
- To a corporate body with gross turnover exceeding the registration threshold.
GST rates and HSN or SAC codes for Advocates, Senior Advocates & Firm of Advocates
| SAC | Description of service | SGST | CGST | IGST |
|---|---|---|---|---|
| 9982 | Legal and accounting services | 9% | 9% | 18% |
Exemptions available for Advocates, Senior Advocates and Firm of Advocates
The exemptions available to advocates, senior advocates and firm of advocates for providing legal services vide notification no.12/2017 Central Tax:
- Service provided by an individual advocate or firm: Such legal services are exempt if provided to:
- Individual advocate or firm of advocates
- Senior advocate
- To a business entity who is eligible for exemption from registration under the CGST Act, 2017.
- To any government entity
- Non-business entity
2. Services provided by senior advocate: Such legal services are exempt if provided to:
- To a business entity who is eligible for exemption from registration under the CGST Act, 2017.
- To any government entity
- Non-business entity
FAQs
Q1. What is the GST rate on legal consultancy fees in India?
The GST rate applicable to legal consultancy fees is 18%.
Q2. Who can pay GST on legal services, the advocate or the client?
The advocate or legal service provider is liable to pay GST on the total fee charged, including fees for appearances, document drafting, and legal consultations.
Q3. Is GST applicable on advocate fees?
It depends. GST is not applicable when legal services are provided by:
- An individual advocate, or
- A firm of advocates
to a business with turnover less than ₹20 lakh (₹10 lakh in special category states), or to non-business entities like individuals.
Q4. When is GST applicable on advocate fees?
GST is applicable when legal services are provided to:
- A business entity having turnover more than ₹20 lakh (₹10 lakh for special category states).
In such cases, the recipient (client) must pay GST under Reverse Charge Mechanism (RCM).
Q5. What is Reverse Charge Mechanism (RCM) in this context?
If an advocate or legal service provider renders services to a business organisation registered under the GST law, the responsibility for paying GST is shifted to the service recipient through the reverse charge mechanism.
In such cases, the advocate or legal service provider might not need to obtain GST registration, as the GST liability falls on the service recipient.
