As we know that all service tax is leviable on all services except those, which are exempted by way of Mega Exemption Notification or Negative List provided under the Finance Act, 1994.

The Central Government vide Notification No. 25/2012- Service Tax dated 20.06.2012 has exempted various taxable services. Entry No. 6 of the said Notification provided exemption with regard to services provided by an arbitral tribunal or an individual as an advocate or a partnership firm of advocates by way of legal services. The relevant text (upto 31.03.2016) is extracted as under:

Entry 6 of Notification 25/2012 reads as under:- 

Services provided by –

….

(b) an individual as an advocate or a partnership firm of advocates by way of legal services to, –

(i) an advocate or partnership firm of advocate providing legal services;

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) a person represented on an arbitral tribunal to an arbitral tribunal;

Further, it is relevant to mention here that generally service tax is payable by the providers of service and liable to discharge Service Tax liability under forward charge. However, there are specified services where Service Recipient is liable to discharge the liability under Reverse Charge Mechanism. In this regard, the Central Government has specified such services vide Notification No. 30/2012- Service Tax dated 20.06.2012. The relevant text (upto 31.03.2016) is extracted as under:

Entry No. A (iv) of the Notification reads as under:

The Taxable service provided or agreed to be provided by,-

(A) an arbitral tribunal, or

(B) an individual advocate or a firm of advocates by way of legal services to any business entity located in taxable territory.

…

The Union Budget vide Notification No. 09/2016 and 18/2016 both dated 01.03.2016 made amendments in Notification No. 25/2012 and 30/2012 both dated 20.06.2012. The relevant text of both the Notifications after the amendment is extracted as under:

Revised Entry 6 of Notification 25/2012 reads as under:-

Services provided by –

….

(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to, –

(i) an advocate or partnership firm of advocate providing legal services;

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) 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;

Revised Entry No. A (iv) of the Notification reads as under:

The Taxable service provided or agreed to be provided by,-

(A) an arbitral tribunal, or

(B) a firm of advocates or an individual advocate other than senior advocate by way of legal services…

On a perusal of the above, it can be inferred that from 01.04.2016 onwards, exemption was withdrawn in the following services, i.e.-

• Services provided by a senior advocate to an advocate or partnership firm of advocates;

• Services provided by a senior advocate as a person represented on an arbitral tribunal to an arbitral tribunal, and

• Services provided by a senior advocate to a person ordinarily carrying out any activity relating to industry, commerce or any other business or profession having turnover of upto 10 lakh in preceding financial year

It is relevant to mention here that in the above instances Senior Advocates became liable to pay Service Tax under forward charge. Concerned Senior Advocates have got stay from some High Courts.

However, the existing dispensation regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued.

Now, the Central Government has issued three Notifications and roll back this adventurous tax liability on Senior Advocates under forward charge. did, in a most confusing way. The gist of Notifications No. 32/2016, 33/2016. 34/2016 all dated 06.06.2016 provided as under:

Notification No.	Our Comments
32/2016 dated	Clause (c) to Entry No. 6 which was amended vide Notification 09/2016 has been further revised as under: (c) a senior advocate by way of legal services to- (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year;”.
33/2016	Service Tax Rules, 1994 has been amended. Changes have been made under Rule 2. The same is not discussed here since it is covered under Notification No. 34/2016 (discussed below).
34/2016	Sub-clause (iv) for item (B) to Entry No. A which was amended vide Notification No. 18/2016 has been further revised as under: (B) an individual advocate or a firm of advocates by way of legal services other than representational services by senior advocates, or”; A new sub-clause has been inserted thereafter which is as under: The taxable services provided or agreed to be provided by a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, and the senior advocate is providing such services, to such business entity who is litigant, applicant, or petitioner, as the case may be

On a perusal of the aforesaid Notifications, it can be summarized that-

• Services provided by senior advocate to a business entity with a turnover of more than Rs 10 lakhs, are taxable;

• The whole of the tax is to be paid by the client.