Legal services largely exempt from GST

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Initial fears about large-scale disruption proved to be unfounded when India moved to a goods and services tax (GST) on 1 July.

The GST does not apply to legal services provided by an individual advocate or a partnership firm to: (1) another partnership firm or individual advocate providing legal services; (2) any person (not a business); or (3) a business entity with turnover below the GST threshold of ₹2 million (US$31,207) in India, with the exception of eight north-eastern states where the threshold is ₹1 million in the preceding financial year. It also does not apply to legal services provided by a senior advocate to any person or business entity with turnover below the GST threshold.

The dual levy destination-based tax has a state GST and central GST component with goods and services classified at five rates: nil %, 5%, 12%, 18% and 28%. Inter-state supplies are subject to an integrated GST.

“There are several commodities wherein classification issues have again become relevant in view of the dispersion of rates,” V Sivasubramanian, tax practice head at Lakshmikumaran & Sridharan, told India Business Law Journal.

Services provided by an arbitral tribunal to any person or business entity with turnover below the GST threshold in the preceding financial year are also exempt from GST. In addition, certain goods have been kept at a 0% GST rate to benefit the masses. This includes judicial and non-judicial stamp papers and court fee stamps when sold by the government treasuries or authorized vendors.

The GST replaces more than a dozen state and central taxes including excise duty, service tax and local sales tax. It is not yet applicable in the state of Jammu and Kashmir for alcohol, crude petroleum, high-speed diesel, petrol, natural gas and aviation turbine fuel. While tax payers – especially service providers – face a heavier compliance burden on account of the GST, the procedure for filing returns for the first two months is less stringent.