IMPACT OF GST VIS-À-VIS ADVOCATE, LAW FIRMS AND SENIOR ADVOCATE BACKGROUND The Step towards the introduction of Goods and Services Tax (GST) was the significant step in the reform of Indirect Taxation in India. The process of amalgamation of central and state taxes into one Single rated Tax would prevent and vindicate the pain of double taxation on every point of channel till it reaches to final consumer. The King of oratory and most admired leader Mr. Atal Bihari Vajpayee and its government first time in year 2000 started discussion for creating change in the present system of administration of tax and for setting up GST by appointing empowered committee under the chairmanship of Mr. Asim Dasgupta (Finance minister of State of West Bengal). The committee was given the task of designing GST with preparedness of IT back up. Later on in 2006, Union Finance Minister Mr. P Chidambaram moved towards GST in his Budget and proposed to Introduce by 1st April 2010 on the writings and findings of empowered committee. In 2014,Hundred and Twenty Second Constitutional Amendment Bill was finally introduced in Lok Sabha on GST- Comprehensive Indirect tax levied on manufacture, Sales and goods and services throughout India which replaces taxes levied by the Central and State Government. The bill was passed in Lok-sabha in May 2015 after being delayed by so many reasons and sent to parliamentary committee for review by the Rajya Sabha. The Principal opposition party was also in favor of concept of GST but demanding many amendments in the bill led by BJP government and finally they protested by walk out from voting. The History was created finally in Rajya Sabha on 3rd August, 2016 when Bill on GST was passed unanimously with key amendments in the bill. GST AND DOCTRINE OF DESTINATION PRINCIPLE GST is the comprehensive uniform/single rated indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. GST IS BASED ON DOCTRINE OF DESTINATION PRINCIPLE The GST structure would follow the destination principle. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-State transactions within India, the State tax would apply in the State of destination as opposed to that of origin. The interpretation of the above mentioned doctrine is that tax will be levied where the supply of good is made not at the place of its origin or purchase or sale after amending article 286 of constitution of India The words of article 286 i.e. "the sale or purchase of goods where such sale or purchase takes place", the words "the supply of goods or of services or both, where such supply takes place" shall be substituted; in respect of tax. FEATURES AND CHARACTERSTICS OF THE BILL The salient features of the Bill are as follows: 1. Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax; 2. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs; 3. Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling; 4. Dispensing with the concept of ‘declared goods of special importance’ under the Constitution; 5. Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services 6. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council. 7. Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years. 8. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. 9. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members. KEY AMENDMENTS IN BILL – PROPOSED IN RAJYA SABHA 1. Deletion of 1% additional tax which had been earlier proposed on all inter-state supply of goods; 2. Full compensation to the States for first five years towards the losses if any, incurred by the States due to implementation of GST. 3. Establishing a mechanism for adjudicating any dispute between Centre and States or between the States, arising out of the recommendations of GST Council. The cap on GST rate, which has yet to be determined, has not been included as a part of the Bill. TAXES WHICH ARE SUBSUMED BY GST Central Taxes:- a. Central Excise Duty, b. Additional Excise Duty, c. Service Tax, d. Additional Customs Duty commonly known as Countervailing Duty, and e. Special Additional Duty of Customs. State Taxes a. Subsuming of State Value Added Tax/Sales Tax, b. Entertainment Tax (other than the tax levied by the local bodies),Central Sales Tax (levied by the Centre and collected by the States), c. Octroi and Entry tax, d. Purchase Tax, e. Luxury tax, and f. Taxes on lottery, betting and gambling. IMPACT OF GST ON PROFESSIONALS SPECIFICALLY- ADVOCATES DEFINATION:- “Advocate” means an advocate entered in any state roll under the provisions of the Advocates Act, 1961. Advocates and lawyers or legal practitioner generally considered officer of the court. Advocate act 1961 parent governing act for the advocates which specify their duties and obligations and restrict them to provide/do any other service or business. Advocates are always served for the administration of justice and provide their services to Clients and courts. FINANCE ACT 2012 AMENDMENT The Finance act 2012 – Amendment – The basic structure of levy of service tax in India has been completely revamped. Earlier the law provided for positive classification meaning thereby only services which fall within the definition will be subject to service tax but it is completely reversed in 2012, now the law provided in the country except the ones which fall in the negative list or exempted by way of exemption notification become taxable. Many writ petitions in various high courts were filed by the advocates association and interim relief of stay was sought and it was firstly granted by Delhi High court in Writ petition(c) No. 2792 of 2011. The relief was sought that Levy of service tax is ultra vires to the constitutionality of India. The contention was that Advocates does not render service because advocate is noble profession they are also the officer of the court and representative of the client. The Levy of service tax will increase the cost of litigant which will affect the administration of justice which is the part of basic structure of our constitution. It is very ironical situation, one side government is promoting free legal aid services and on the other side charging service tax on litigants. NOTIFICATIONS AND INTERPREATTION 1. NOTIFICATION NO- 12/2012 -ST The Ministry of Finance Vide notification no./12/2012/service tax in respect of service tax issues various exemptions in various taxable services which also includes:- Lawyer and law firms but with subject to limitation. The entry 6 of the negative list is as follows:- “Entry 6 Services provided to any person other than a business entity by:- An Individual as an Advocate A person represented on and as arbitral tribunal.” Hence, advocates services were exempted from service tax as per above notification except services provided to business entity but in the same year 2012 New notification no. 25/2012 was published in the official gazette by the ministry of finance in suppression of Notification No. 12/2012. 2. NOTIFICATION NO – 25/2012-ST They issued new exemption list in that entry 6 was amended and substituted by:- Following Services are exempted provided by Arbitral tribunal to - (a) Any person other than business entity (b) A business entity with a turnover up to rupees ten lakh in the preceding financial year Following services are exempted provided by an individual advocate and partnership firm of advocates by way of legal services to: (a) An advocate or partnership firm of advocates providing legal services (b) Any person other than a business entity (c) A business entity with a turnover up to rupees ten lakh in the preceding financial year Interpretation: In Notification 12/2012 arbitral tribunal and advocates were fully exempted other than services to business entity but by notification 25/2012 amendment was done certain conditions and situations are only exempted. Service provided by advocates or partnership firms or law firms to business entities who has turnover above 10 lakhs in the preceding financial year are subject to service tax. The concept of reverse charge mechanism was applicable in 2012. In reverse charge basis – service receiver has to pay the 100% amount of service tax to the concerned authority. 3. NOTIFICATION NO – 9/2016-ST In 2016 Subsequent notification no. 9/2016 passed by the ministry of finance to amend the notification no. 25/2012 in exercise of power conferred by sub-section (1) of section 93 of the finance act, 1994(32 of 1994) In the above notification of 2016 Entry 6 clause (b) and (c) was again amended and substituted by Following services are exempted from service tax (B) A partnership firm of advocates or an individual as an advocate other than a senior advocate by way of legal services to (i) An advocate or partnership firm of advocates providing legal servicers (ii) Any person other than a business entity (iii) A business entity with a turnover up to rupees ten lakh in the preceding financial year (C) A senior advocate by way of legal services to a person other than a person ordinarily carrying out any activity relating to industry, Commerce or any other business or profession. Interpretation: Advocates are subject to service tax in certain conditions mentioned above but senior advocates are subject to service tax fully. The exemption provided to them has very narrow scope. Hence writ petition is filed before the Delhi High Court by Delhi High Court Bar Association & Anr under article 226 of constitution of India to strike down the service tax levy on legal services as it is ultra vires, arbitrary and voilative of articles of Indian Constitution. It is also not clear whether service tax levied on legal services is based on reverse charge basis and forward charge basis. Before as per notification no 30/2012/servicetax it was reverse charge basis – 100 percent of tax has to be paid by recipient of service whereas notification no. 18/2016 and 19/2016-ST reversed the concept of payment of service tax and senior advocates are subject to service tax on forward charge basis which is ultra vires to the constitution of India and advocates act 1961 on the ground that senior advocate are barred from accepting the brief directly. The client’s engage them through other advocate and they issue bills on advocate’s firm who engage them and brief them. The above notification puts fetter on justice delivery system Senior advocates are Provide services to the court on certain points and they are also prestige officers of the court, Therefore question arise “Whether judges are service recipient and subject to service tax. The major concern of this representation is that now all the above notification will be subsumed by the new bill GST and GST will be applicable and still the cap of single rated tax is not disclosed. Therefore Impact of GST on lawyers will be totally negative because current prevailing rate of service tax is 15 percent including krishi kalian tax – recent amendment but GST cap might be more than 15 percent. The matter is still need to be decided on priority basis to save the administration of justice and cost of litigants. Litigants are already suffering from the agony of long and expensive justice delivery system of India. Now even the government is levying service tax and taxing them to death. RECOMMENDATION AND CONCLUSION 1. The current prevailing law of service tax and concern notifications are ultra vires to the constitution of India and bad in eyes of law should be struck down immediately. 2. Writs should be filed before the Hon’ble High Court to Struck down the notification and lawyers should be exempted absolutely from service tax because they are not service providers but they are their representatives. 3. The courts should also direct the review committee of the GST bill after subsuming all the indirect tax and lawyers will not be subject to GST SINGLE TAX ALSO.