Applicability of GST on Legal Services in India and Its Impact

Introduction

The introduction of the Goods and Services Tax (GST) in India has significantly transformed the country’s indirect tax framework, impacting various sectors, including the legal profession. Legal services, once exempted or minimally taxed under the earlier regime, are now brought under the GST ambit with specific provisions. For advocates, law firms, and clients alike, understanding the applicability and nuances of GST is crucial to ensure compliance and proper billing. This blog explores in detail how GST applies to legal services in India and what its implications are.

What is GST?

GST is a unified indirect tax that replaced a host of central and state taxes in India, including service tax, VAT, excise duty, and more. It is levied on the supply of goods and services and is designed to create a seamless national market by subsuming multiple taxes. GST operates on a value-added mechanism, where tax is levied at each stage of the supply chain but with credit available for tax paid on inputs. GST is governed by the Central Goods and Services Tax Act, 2017 and is monitored by both central and state tax authorities.

Slabs of GST

There are four primary GST slabs in India:

1. 1. 5% – Essential items, transport services
   2. 12% – Processed food, business class air travel
   3. 18% – Standard tax rate for most services including legal services
   4. 28% – Luxury goods, sin goods

Legal services generally fall under the 18% slab unless exempted or covered under the Reverse Charge Mechanism (RCM).

Here’s a concise table of GST slabs relevant for legal services in India:

Applicability of GST on Advocates and Legal Services

Under GST law, legal services provided by:

1. 1. An individual advocate
   2. A senior advocate
   3. A firm of advocates,
      are considered as “taxable services.” However, the law also provides specific exemptions and identifies who is liable to pay the tax under various scenarios. The Central Government has notified legal services under the Reverse Charge Mechanism (RCM), where the service recipient—not the service provider—bears the GST liability in most cases.

Is There GST on Legal Fees and Services?

Yes, legal fees are subject to GST, but who pays it depends on the nature of the service recipient:

1. 1. If the client is a business entity, GST is payable under RCM by the client.
   2. If the client is an individual (non-business entity), then such legal services are exempt from GST.
   3. If an advocate provides services to another advocate or law firm, it is also exempt.

Thus, the burden of GST generally falls on business entities availing legal services, and not on individual clients or the legal service providers in most cases.

GST Registration for Lawyers & Law Firms

According to GST rules:

1. 1. Advocates and law firms are not required to register under GST if their services are entirely covered under RCM and their turnover is below the threshold limit.
   2. If a lawyer or law firm provides services directly liable for GST (i.e., to individuals or non-business entities), and their annual turnover exceeds ₹20 lakhs (₹10 lakhs in special category states), they must register under GST.

Hence, most independent advocates or small firms are exempt from mandatory registration unless their service recipients are not covered under RCM or their turnover exceeds the prescribed limits.

Legal Services by Law Firms or an Individual Lawyer to:

Legal services provided to business entities located in the taxable territory attract GST under RCM. This includes:

1. 1. Drafting and reviewing contracts
   2. Advisory services
   3. Representation before courts, tribunals, or authorities

In such cases, the recipient business entity is liable to pay GST under RCM. No tax invoice is raised by the advocate; instead, a bill is issued without GST.

Legal Services by a Senior Advocate to:

A Senior Advocate, by definition, is one designated by the Supreme Court or High Court. Legal services provided by a senior advocate to:

1. 1. Another advocate or law firm – Exempt
   2. Non-business entities – Exempt
   3. Business entities – Taxable under RCM

Earlier, there was some confusion about whether senior advocates should collect GST themselves. However, the matter has been clarified to state that even senior advocates are covered under RCM when dealing with business entities.

What is Reverse Charge Mechanism (RCM)?

The Reverse Charge Mechanism is a system under GST where the recipient of goods or services pays the tax instead of the supplier. It is generally applied to specific categories to ensure tax compliance where it is difficult to monitor or enforce at the supplier’s end.

GST on Legal Services under RCM

As per the GST Council notifications, legal services availed by a business entity from an individual advocate, law firm, or senior advocate are covered under RCM. In such cases:

1. 1. The lawyer or firm does not charge GST
   2. The client (if a business entity) is required to self-invoice and pay 18% GST
   3. The client can claim Input Tax Credit (ITC) on the GST paid

Who Can Help You Here?

For lawyers and law firms navigating GST obligations, professional help from:

1. 1. Chartered Accountants
   2. GST Practitioners
   3. Tax Consultants
      is highly advisable. They can help with:
   4. Determining GST liability
   5. Filing returns (if applicable)
   6. Understanding exemption and compliance under RCM
   7. Maintaining proper records and invoicing

This is particularly useful for firms with mixed clients (business + individual) or those crossing turnover thresholds.

Conclusion

GST has undoubtedly impacted how legal services are billed and taxed in India. While most independent lawyers and law firms are not required to collect GST due to the RCM provision, awareness of exemptions, registration limits, and compliance obligations is essential. For business clients, understanding their liability under RCM is equally critical. As the GST regime continues to evolve, staying informed ensures both compliance and clarity in professional legal dealings. For legal professionals, understanding GST is now as important as understanding the law itself.