The Supreme Court yesterday stayed the proceedings in Delhi and Chhattisgarh High Courts relating to the applicability of Goods and Services Tax (GST) to legal services.
A Bench of Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud passed the order to that effect in a transfer petition filed by the Central government seeking transfer of cases pending in the two High Courts to Supreme Court.
Additional Solicitor General Pinky Anand appeared for the Central government.
In a petition filed by one JK Mittal, the Delhi High Court had ordered that there will be no GST registration for lawyers and law firms for any legal service till it was clarified whether all legal services provided by legal practitioners and firms would be governed by the reverse charge mechanism.
Mittal, the proprietor of J.K. Mittal & Company – a law firm having its office in Delhi but representing clients in various courts and tribunals across India – had contended that the notifications issued by the Central government are in violation of the provisions of the CGST Act and DGST Act read with Article 279A of the Constitution of India and has adverse consequences on those practising the legal profession.
By Notification No. 13120 17- B-Central Tax (Rate) dated 28th June, 2017 as well as Notification No. 1312017-State Tax (Rate)- 30 June, a “reverse charge” had been made applicable to recipients of services rendered by all lawyers, law firms and Senior Advocates.
According to the provisions of Article 279A (brought in by the Constitution 101st Amendment Act of 2016), the various rates and slabs for GST under the CGST Act would be made only on the basis of the recommendations of the GST Council. Mittal had questioned why he, and others like him providing legal (representational and non-representational) services should be charged GST when the Council had recommended that legal services would be amenable only to a “reverse charge”.
Mittal had also contended that a legal practitioner like himself who is already registered under the Finance Act, 1994 (he registered in 2011) would have to be exempted from registration under the GST laws under Section 23 (2) read with Section 22 (2) of the CGST Act and corresponding provisions of the IGST Act and DGST Act.
The High Court had framed the question – whether legal practitioners providing both representational and non-representational services would be required to register under the respective GST Acts if they were already previously registered under the Finance Act?
Mittal had stated that he does not wish to be registered, because such registration would make him liable to pay GST on a reverse charge basis when he is already doing so by virtue of being registered under the Finance Act.
The Court held that there was no clarity on whether all legal services provided by legal practitioners and firms would be governed by the reverse charge mechanism. If in fact, all legal services are to be governed by the reverse charge mechanism, then there would be no purpose in requiring legal practitioners and law firms to compulsorily get registered under the CGST, IGST and DGST Acts.
Asking the authorities to clarify, the Court had held that till such clarification is provided to the Court, no coercive action be taken against lawyers or law-firms for not complying with any legal requirement under the CGST Act, the IGST Act or the DGST Act.
Therefore, till final hearing of this case, there will be no GST registration for lawyers and law firms for any legal service, the High Court had ordered.
A similar case was pending in Chhattisgarh High Court as well.
The Supreme Court yesterday issued notice in Centre’s transfer petitions and stayed the proceedings in both the High Courts.
“Issue notice fixing a returnable date within four weeks. There shall be stay of further proceedings in Writ Petition(C) No.5709 of 2017 and Writ Petition(C)No.6017 of 2017 pending before High Court of Delhi and Writ Petition(T)No.274 of 2017 pending Chhattisgarh.”
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