Any change affected by laws affects the ultimate consumer or receiver of service either positively or negatively. Same was the case when the Finance Bill 2016 brought legal service provided by senior advocate under the tax.
Prior to Finance Bill 2016 services provided by an individual as an advocate or a partnership firm of advocates by way of legal services to an advocate or partnership firm of advocates providing legal services or any person other than a business entity or a business entity with a turnover up to rupees ten lakh in the preceding financial year was exempt from the levy of Service Tax vide Notification No. 25/2012-ST dated 20.06.2012. Therefore legal service provided by advocate or firm of advocate to any business entity with the turnover exceeding rupees ten lakhs in the preceding financial year was covered under Reverse Charge Mechanism vide Notification No. 30/2012-ST dated 20.06.2012.
With the Finance Bill 2016, legal services provided by an individual as an advocate or a partnership firm of advocates other than a senior advocate by way of legal services to an advocate or partnership firm of advocates providing legal services or any person other than a business entity or a business entity with a turnover up to rupees ten lakh in the preceding financial year is exempt from the levy of Service Tax vide Notification No. 09/2016-ST dated 01.03.2016. The recent Notification also exempts services provided by a senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.
Therefore services provided by a senior advocate by way of legal service to any person who is ordinarily carrying out any activity relating to industry, commerce or any other business or profession will be chargeable to Service Tax with effect from 01.04.2016. The Government vide Notification 18-2016-ST dated 01.03.2016 has excluded services provided by a senior advocate by way of legal services from the scope of Reverse Charge Mechanism. This new Forward Mechanism was not welcome by the senior advocates who in turn approached the Hon’ble High Courts, resulting into an interim relief against collection of Service Tax vide order of the Hon’ble Gujarat High Court order no 4926 of 2016 in the case of Percy Cawas Kavina vs. UOI. This stay order was also upheld by the Hon’ble Delhi High Court. Thus the Forward Mechanism stands reversed.