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Delhi HC Questions The Legal Sanctity Of Finance Ministry’s Press Release On GST On Legal Services

The Delhi High Court, on Tuesday, asked the Centre to clarify the “legal sanctity” of the Press Release issued by it earlier this week, wherein the Ministry of Finance had clarified that legal services provided by an individual Advocate, including a Senior Advocate and a Firm of Advocates, is liable for payment of GST under reverse charge(RCM) by the business entity.
The question was posed by a Bench comprising Justice S. Muralidhar and Justice Pratibha M. Singh, after Mr. Sanjeev Narula, Central Government’s Standing Counsel presented before it the Press Release issued by the Ministry of Finance. 
Several queries on the release cropped up during the hearing, pursuant to which, Mr. Narula sought time to seek instructions on the following questions in particular: (i) Whether there were any further recommendations of the GST Council on ‘legal services'after the recommendations made at the 14th Meeting of the GST Council held on 19th May, 2017.
(ii) What is the legal sanctity of the Press Release?
(iii) Whether on a reading of Article 279A of the Constitution read with provisions of the CGST, IGST and DGST Acts, the recommendations of the GST Council could be modified, clarified, amended etc. by a notification/notice/circular of ‘press release’ and, if so, by whom? Mr. Narula has also been directed to ascertain whether a lawyer or a law firm, which has been registered under the Finance Act, 1994 could opt to de-register or surrender the registration, and if a mechanism was devised for such purpose. The Court, thereafter, issued the following interim orders:  
“(i) no coercive action would be taken against advocates, law firms of advocates including Limited Liability Partnerships (LLPs) of advocates providing legal services for non compliance with any legal requirement under the CGST, DGST, or IGST Act; and (ii) Any advocate, law firm of advocates, LLPs of advocates who are providers of legal services, who have registered under the CGST, DGST, or IGST Act from 1st July, 2017 will not be denied the benefit of this interim order.
(iii) In view of the Press Release issued by the Ministry of Finance as shown to the Court today, and the instructions given to Mr. Narula to the effect that the legal position that existed under the Finance Act, 1994 as regard legal services being amenable to service tax under the reverse charge mechanism continuing even under the CGST, DGST or IGST Acts, till further orders, all legal services provided by advocates, law firms of advocates, or LLPs of advocates ‘will be continued to be governed by the reverse charge mechanism unless of course any such legal service provider wants to take advantage of input tax credit and seeks to continue with the voluntary registration under Section 25 (3) of the CGST Act and the corresponding provisions of IGST or DGST Act.”
The Bench also directed the Respondents to file a para wise reply to the Petition and specifically answer the queries posed by it in its earlier order as well today’s order. The Bench had, last week, opined that as of date, there is no clarity on whether all legal services provided by legal practitioners and firms would be governed by the reverse charge mechanism.
The Court is hearing a Petition filed by J.K. Mittal & Company, which has challenged notifications issued by the Centre and Delhi Government, wherein it was prescribed that advocates and law firms would pay the tax on all services offered by them. Only representational services were made an exception, dictating that it would be the clients who would pay the tax for such services. The Petitioner has claimed that this is contrary to the recommendation made by the GST Council that the service recipient would pay the tax on all services offered by a lawyer and a law firm.
Besides, the Petitioner has also sought clarification on the need for re-registration for lawyers who had already registered themselves under the Finance Act, 1994.
The Business standard, New Delhi, 20th July 2017


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