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Is Legal Consultancy Services Taxable?

Is Legal Consultancy services Taxable?Legal Consultancy Services means any service provided or to be provided –

        i.  To any person, by a business entity in relation to advice, consultancy or assistance in any branch of law, in any manner

      ii.  To any business entity, by any person, in relation to representational services before any Court, Tribunal, or authority

     iii.  To any business entity, by an arbitral tribunal, in respect of arbitration, is a ‘taxable service’.

Here, Business Entity includes an Association of Persons (AOPs), Body of Individuals (BOIs), Company or Firm but does not include an Individual.

Date from which such service is taxable – 1st September, 2009

Scope of Taxable Service has been expanded vide Budget 2011 w.e.f. 1-5-2011. Representational services before any Court, Tribunal or Authority would be taxable, if provided to legal entity even by an individual. Arbitration services will also be subject to tax.

Scope of existing services is expanded to include –

        i.  Services of advice, consultancy , or assistance provided by a business entity to individuals as well;

       ii.  Representational services provided by any person to a business entity; and

      iii.  Services provided by arbitrators to business entities.

Services provided by individuals to other individual will remain outside the levy.

Export and Import of Services

The service will be held s ‘export of service’ or ‘import of service’ on following basis.

Services in relation to immovable property – The service will be ‘export of service’ if service is provided in relation to immovable property situated outside India and payment for such service is received by service provider in convertible foreign exchange.

Services other than relating to immovable property – In case of services relating to other than immovable property, the service will be ‘export of services’ if recipient is located outside India and payment for such services is received by service provider in convertible foreign exchange. If recipient has commercial establishment or office relating thereto in India, order for provision of such service should be made from outside India.

Before 1-5-2011definition of Legal Consultancy Services was as follows:

Any service provided or to be provided to a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law in any manner. However, any service provided by way of appearance before any court, tribunal or authority shall not amount to taxable services.

Earlier both service providers and receivers were Business Entity.

Cases where legal consultancy services are not liable to service tax before 1-05-2011:

  • Where such service is provided by way of appearance before any court, tribunal or authority;
  • Where such service provider and/ or service recipient is an individual.

But from 1-05-2011 the scope of taxable service has been expanded vide Finance Act, 2011 covers arbitral services and representational services before any Court, Tribunal or Authority too.

About: 

Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.

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