Advocate Services Under RCM in GST: Complete Guide
Advocate services under RCM in GST make the business entity liable to pay GST directly when it receives legal services from an advocate, senior advocate or firm of advocates.
Advocate services under RCM in GST apply when an individual advocate, senior advocate, or firm of advocates provides legal services to a business entity located in India’s taxable territory. In such cases, the business entity pays GST directly to the Government under reverse charge, instead of the advocate charging GST in the invoice. Legal Provision for Advocate...
Advocate services under RCM in GST apply when an individual advocate, senior advocate, or firm of advocates provides legal services to a business entity located in India’s taxable territory. In such cases, the business entity pays GST directly to the Government under reverse charge, instead of the advocate charging GST in the invoice.
Legal Provision for Advocate Services Under RCM
Advocate services are covered under Entry 2 of Notification No. 13/2017-Central Tax(Rate), dated 28 June 2017. This entry covers services provided by:
- an individual advocate,
- a senior advocate, or
- a firm of advocates,
by way of legal services, directly or indirectly, to a business entity located in the taxable territory.
The recipient of service is the business entity. The business entity has to pay GST under reverse charge.
What are Legal Services Under GST?
The notification defines legal service in wide terms. Legal service means any service provided in relation to advice, consultancy, or assistance in any branch of law, in any manner. It also includes representational services before any court, tribunal, or authority. This covers both advisory work and litigation work.
📘 Tax Audit Season Is Here — Are You Fully Prepared? | Click Here
Examples of legal services covered under RCM
Advocate services under RCM in GST include:
- legal opinion on contracts,
- drafting of notices,
- drafting of agreements,
- representation before courts,
- appearance before tribunals,
- GST litigation support,
- income-tax appeal representation,
- arbitration-related legal assistance,
- company law advisory,
- labour law advisory,
- property title opinion,
- due diligence by advocates,
- legal consultancy by a firm of advocates.
The wording “directly or indirectly” is important. It covers legal services arranged through another advocate or routed through a law firm, where the service is ultimately provided to a business entity.
Who is an Advocate for GST RCM?
The term advocate has the same meaning as assigned under section 2(1)(a) of the Advocates Act, 1961. It means an advocate entered in any roll under the Advocates Act.
A senior advocate is covered as per section 16 of the Advocates Act, 1961. A senior advocate is an advocate designated by the Supreme Court or a High Court based on ability, standing at the Bar, special knowledge, or experience in law. A firm of advocates is also covered under the RCM entry.
Who Pays GST on Advocate Services?
The business entity receiving legal services pays GST under RCM. A business entity means any person carrying out business. It includes companies, LLPs, partnership firms, proprietorship concerns, societies, trusts carrying on business, co-operative societies and other persons engaged in commercial activity.
The business entity must be located in the taxable territory.
Under Explanation (c) to Notification No. 13/2017-Central Tax (Rate), where a business entity is a litigant, applicant, or petitioner, that business entity is treated as the recipient of legal services for this RCM entry.
GST Rate on Advocate Services Under RCM
The GST rate on advocate services under RCM is 18%.
For intra-State supply, the recipient pays:
| Tax component | Rate |
| CGST | 9% |
| SGST | 9% |
| Total | 18% |
For inter-State supply, IGST applies at 18%.
The place of supply and location of supplier and recipient decide whether CGST-SGST or IGST applies.
When Advocate Services Are Exempt From GST
All legal services by advocates do not attract GST. Entry 45 of Notification No. 12/2017-Central Tax (Rate) provides exemption for specified legal services.
Exemption for services by an individual advocate or firm of advocates
Legal services provided by a partnership firm of advocates or an individual advocate, other than a senior advocate, are exempt when provided to:
- an advocate or firm of advocates providing legal services,
- any person other than a business entity,
- a business entity whose aggregate turnover in the preceding financial year is within the GST registration exemption threshold,
- Central Government, State Government, Union territory, local authority, Governmental Authority, or Government Entity.
Exemption for services by a senior advocate
Legal services provided by a senior advocate are exempt when provided to:
- any person other than a business entity,
- a business entity whose aggregate turnover in the preceding financial year is within the GST registration exemption threshold,
- Central Government, State Government, Union territory, local authority, Governmental Authority, or Government Entity.
This means RCM does not apply where the legal service itself is exempt.
Advocate Services to Small Business Entities
If the business entity’s aggregate turnover in the preceding financial year is within the exemption limit for GST registration, legal services received from an advocate are exempt under Entry 45.
In such a case, GST under RCM is not payable. This rule protects small business clients who fall within the registration exemption threshold under section 22 of the CGST Act.
Where turnover crosses the registration exemption threshold, the legal service received by the business entity falls under RCM, subject to other conditions.
CBIC Clarification on Legal Services
CBIC Circular No. 27/01/2018-GST, dated 4 January 2018, clarified an important issue. Legal services other than representational services provided by an advocate, including a senior advocate, to a business entity are also covered under reverse charge.
Therefore, RCM applies not only to court appearance or representation. It also applies to legal advice, legal consultancy, drafting, assistance, and other legal services provided to a business entity. This clarification removes the common misunderstanding that RCM applies only when an advocate appears before a court or tribunal.
Registration Position of Advocates
A person engaged only in making supplies on which the entire GST is payable by the recipient under reverse charge is exempt from GST registration under section 23(2) read with Notification No. 5/2017-Central Tax, dated 19 June 2017.
Therefore, an advocate or firm of advocates providing only RCM-covered legal services is not required to obtain GST registration for those services. If the advocate also supplies services not fully covered under RCM or exempted entries, the registration position has to be checked separately under sections 22, 23, and 24 of the CGST Act.
Invoice and Documentation Under RCM
Documentation depends on whether the advocate is registered under GST.
If the advocate is registered
The advocate issues a tax invoice. The invoice should mention that tax is payable on reverse charge basis. The business entity pays GST under RCM.
If the advocate is unregistered
The business entity issues a self-invoice under section 31(3)(f) of the CGST Act because it is liable to pay GST under RCM and has received service from an unregistered supplier.
The business entity also issues a payment voucher under section 31(3)(g) at the time of making payment to the advocate. A proper self-invoice should contain advocate details, recipient GSTIN, invoice number, date, description of legal service, taxable value, GST rate, tax amount, place of supply, and RCM remark.
Time of Supply for Advocate Services Under RCM
For services taxable under reverse charge, section 13(3) of the CGST Act determines the time of supply.
The time of supply is linked to the date of payment, the date following sixty days from the supplier’s invoice, and the recipient invoice rule where the recipient is required to issue invoice.
From 1 November 2024, the law specifically recognises the date of invoice issued by the recipient in cases where the recipient has to issue invoice.
Businesses should track advocate bills and payment dates each month. Delay in identifying the time of supply leads to interest exposure under section 50.
Payment of GST Under RCM
GST under RCM has to be paid through the electronic cash ledger. Input tax credit balance in the electronic credit ledger is not permitted for payment of RCM liability. Rule 85(4) of the CGST Rules requires reverse charge liability to be discharged by debiting the electronic cash ledger.
After payment, eligible ITC is claimed subject to section 16 and section 17 of the CGST Act.
ITC on Advocate Services Under RCM
A business entity is eligible to claim input tax credit of GST paid under RCM on advocate services if the legal service is used in the course or furtherance of business.
For example, ITC is available on legal fees for GST litigation, tax advisory, recovery proceedings, contract drafting, company law compliance, business disputes, labour matters, or commercial arbitration.
ITC is restricted where the legal service relates to personal matters, exempt supplies, non-business activity, or blocked credit under section 17(5).
Where legal services are used partly for taxable and partly for exempt supplies, proportionate reversal is required under section 17.
Reporting in GST Returns
The business entity reports advocate services under RCM in Form GSTR-3B. The tax liability is reported under inward supplies liable to reverse charge. After cash payment, eligible ITC is reported in the input tax credit section.
Businesses should maintain a separate RCM register for advocate bills. This register should capture the invoice date, advocate's name, GSTIN (if available), nature of matter, taxable value, tax paid, challan details, ITC claimed and return period.
Conclusion
Advocate services under RCM in GST require clear identification of the supplier, recipient, nature of service, and exemption status. When an individual advocate, senior advocate, or firm of advocates provides legal services to a business entity located in the taxable territory, the business entity pays GST under reverse charge.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
