Legal services to be governed by reverse charge mechanism, legal sanctity of press releases questioned

Delhi High Court: In the process of hearing the petition filed by JK Mittal & Company with respect to the notifications issued by the Central Government with respect to applicability of GST on services provided by advocates and law firms, the Division Bench comprising of S. Muralidhar and Pratibha M. Singh, JJ., sought clarifications from the government over various issues.

The respondents, the Union of India, produced a press release issued by the Press Information Bureau, Ministry of Finance which lay down that advocates and law firms were liable to pay tax on all services offered by them except for representational services, the tax for which would be paid by the clients. Several questions arose as regards the press release. Some of them were: what authority of law had the power to issue such a notice and its legal sanctity thereof; whether any provision of the Constitution of India, especially Article 279A, prescribed modification, clarification or amendment of provisions of any of the Goods and Services Tax Acts by a circular of press release and if so, by whom?

The respondents sought time to seek instructions pertaining to these questions and as to whether a lawyer registered under the Finance Act, 1994 had the option to de-register or surrender his registration if a mechanism was devised for this purpose. The Court directed that the respondents file a paragraph wise reply and order all the queries raised in the present and a previous order specifically.

Also, the Court ordered that no coercive action be taken against law firms, advocates and Limited Liability Partnerships for non-compliance; and that till further orders, all legal services provided by advocates, law firms and LLPs will continue to be governed by reverse charge mechanism of the Finance Act, 1994. [J.K. Mittal & Company v. Union of India, 2017 SCC OnLine Del 9220, dated 18.07.2017]