The Delhi High Court has sought clarity from the Centre, Delhi government and the Goods and Services Tax Council on whether the relevant GST laws make it incumbent on lawyers and law firms to register under GST and face the resultant obligations including having to pay tax under reverse charge mechanism. Until and unless the clarity is provided, the court said, no coercive action could be taken against these entities for non-compliance.
The court asked the authorities to explain if registering under GST is optional for an entity that doesn’t provide representational legal services, where it appears in court, tribunal or authority. The counsel representing the respondents sought more time to clarify on the issue. It is unclear if legal services such as consultancy, opinion and drafting among others require mandatory GST registration and pay taxes under RCM.
Under GST, the Council has listed a dozen services where tax will be collected under RCM. The RCM is to ensure that the government doesn’t lose revenue in supplies made by unregistered to registered entities. Here, the liability to pay tax is on the recipient of goods/services instead of the supplier as in other cases (of course, the tax burden falls on the recipient in all cases).
In the instant case, the petitioner was registered under service tax (where RCM existed) but doesn’t want to register under GST if that option is available to him, as his services are not representational in nature.