Legal Services by advocates to be governed by reverse charge mechanism till further orders: Delhi HC

The Delhi High Court today directed that all legal services provided by advocates, law firms and Senior Advocates will be continued to be governed by the existing reverse charge mechanism till further orders..The Bench of Justices S Muralidhar and Pratibha M Singh passed the order while hearing the plea filed by Advocate JK Mittal asking among other things that whether all legal services provided by legal practitioners and firms would be governed by the reverse charge mechanism under the new GST regime..The Court also ordered that no coercive action would be taken against advocates, law firms of advocates including Limited Liability Partnerships (LLPs) of advocates providing legal services for non compliance with any legal requirement under the CGST, DGST, or IGST Act..Appearing for the Centre, Advocate Sanjay Narula produced a Finance Ministry Press Release dated July 15, 2017 regarding the applicability of GST on legal services provided by individual advocates including Senior Advocates and law firms..The Ministry of Finance has clarified that the Goods and Service Tax on services provided by lawyers including Senior Advocates and law firms would be applicable on ‘reverse charge’ basis..At the previous hearing, the Court had asked – whether legal practitioners providing both representational and non-representational services would be required to register under the respective GST Acts if they were already previously registered under the Finance Act?.Mittal had stated that he does not wish to be registered, because such registration would make him liable to pay GST on a reverse charge basis when he is already doing so by virtue of being registered under the Finance Act..The Court had held that there was no clarity on whether all legal services provided by legal practitioners and firms would be governed by the reverse charge mechanism. If in fact all legal services are to be governed by the reverse charge mechanism than there would be no purpose in requiring legal practitioners and law firms to compulsorily get registered under the CGST, IGST and DGST Acts..After having seen the Finance Ministry’s press release today, the Court asked:.Whether there were any further recommendations of the GST Council on ‘legal services’ after what had been recommended at the meeting of the GST Council on May 19, 2017.Under what authority of law, such a ‘Press Release’ could be issued and by whom and what is the legal sanctity thereof.Whether on a reading of Article 279 A of the Constitution along with any of the provisions of the CGST, IGST and DGST Acts, the recommendations of the GST Council could be modified, clarified, amended etc by a notification/circular of ‘press release’ and, if so, by whom?.Narula sought time to take instructions from the government on the questions raised by the court..In the meanwhile, the Court ordered that each of the Respondents should file para wise replies to the questions raised in the petition and listed the matter for further hearing on September 18..Read Order