Services of lawyers do not attract GST or Service Tax liability.

Case Title: Devi Prasad Tripathy v. Principal Commissioner CGST & Central Excise, Bhubaneswar

Court Name: High Court of Orissa

Petition No.: W.P.(C) No. 27727 of 2020

Category of Dispute: GST Exemption / Service Tax Applicability on Legal Services

Date of Judgement: 31st March 2021

Relevant Sections: Section 9(1) CGST Act, 2017; Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017; analogous Service Tax Notification No. 25/2012-ST dated 20.06.2012

Issue: Unjustified issuance of GST/Service Tax notices to a practicing advocate despite exemption under law

Facts of the Case

1. The petitioner, Devi Prasad Tripathy, is a practicing individual advocate in the High Court of Orissa [Para 2].
2. He was issued a notice by the GST Department despite being exempt from GST liability as per Notification No. 12/2017-CT(R) and earlier Notification No. 25/2012-ST [Para 4].
3. He had earlier responded to a similar notice in 2017, clarifying that he was not liable to pay service tax [Para 4].
4. The Department in its counter affidavit accepted that proceedings against him were dropped upon receipt of information confirming his status as an advocate [Para 2].
5. Despite this, the Department insisted that the petitioner must produce evidence proving he is a practicing lawyer [Para 3].

Question(s) in Consideration

1. Whether issuance of GST/service tax notices to practicing advocates is legally sustainable despite statutory exemptions?
2. Whether the burden lies on an individual advocate to prove his exemption from tax liability when the statute provides blanket exemption?

[Para 3–4]

Observation of the Court

1. The Court expressed serious concern over the insistence by the Department that advocates must prove their exempt status through documentation [Para 3].
2. It noted that the legal services provided by individual advocates to business entities are exempt under the Service Tax and GST regimes [Para 4].
3. The Assistant Solicitor General conceded that no such notices should have been issued to practicing advocates in the first instance [Para 5].
4. It was observed that other advocates too had received similar unjustified notices, indicating a systemic issue [Para 6].
5. The Court directed that clear instructions must be issued to all GST Commissionerates in Odisha to refrain from issuing such notices to exempt legal professionals [Para 7].

Judgement of the Court

1. The Court directed the Commissioner, CGST, to ensure that no demand notices under GST or Service Tax are issued to practicing advocates providing legal services that fall within the exempt category [Para 7].
2. Clear instructions must be issued to all enforcement officers, and proof of such directions must be filed with the Court in the next hearing [Para 7].
3. Matter listed for monitoring compliance on 22nd April 2021 [Para 8].

Between Fine Lines

• Advocates providing legal services are exempt from GST and Service Tax.
• Issuance of demand notices to such professionals is unwarranted and amounts to harassment.
• The burden of proof should not lie on exempted individuals.
• Tax officers must be sensitized to applicable exemptions.
• Judicial intervention was necessary to prevent recurrence.

Summary of Referred Cases

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