The Orissa High Court has exempted individual practicing lawyers from Goods and Services Tax (GST) and service tax. The court quashed notices issued to a lawyer in Bhubaneswar demanding Rs. 2,14,600 in service tax and Rs. 2,34,600 in penalties plus interest.
The court's decision is based on the fact that the lawyer's income is derived from his legal services as a practicing lawyer. The court cited instructions issued by the Commissioner GST which exempts legal services from tax under specific conditions.
The exemption specifically covers services provided by advocates or partnerships to non-business entities and business entities with a turnover below Rs. 10 lakhs in the preceding financial year.
The High Court referenced a previous ruling that advocates should not face harassment related to service tax/GST. This aligns with the principle that legal professionals offering services included in the 'negative list' of the GST regime are not subjected to such taxes.
The court granted the tax department the right to levy taxes on income from other sources, such as house property, as per the law.
The case, Shivananda Ray v. Principal Commissioner CGST and Central Excise. Bhubaneswar and Others (W.P.(C) No.6592 of 2025), involved a petition to prevent tax authorities from taking action against an individual legal practitioner. The High Court's decision emphasized that the exemption applies specifically to income derived from legal practice, not necessarily other income streams.
The Orissa High Court has reminded the GST and Service tax authorities not to harass practicing lawyers by issuing them notices for levy of GST or service tax.
A Chief Justice Harish Tandon and Justice BP Routray thus quashed the notices issued to a Bhubaneswar based lawyer demanding service tax of Rs.2,14,600/- and penalty of Rs.2,34,600/- plus interest.
It observed, “in view of the admitted fact that the Petitioner is a practicing lawyer…the Department the Petitioner is exempted from levy of service tax for such income he derived from his legal service as a Lawyer.”
Petitioner has sought to restrain the Respondent-authorities from taking action against him since he is an individual legal practitioner.
The Department on the other hand submitted that the SCN was issued to the Petitioner for contravention of the Finance Act.
The High Court however took note of instructions issued by the Commissioner GST, stating that services provided by an advocate or a Partnership firm of advocates providing legal services to any person other than a business entity and to a business entity with a turnover up to rupees ten lakhs in the preceding financial year are exempted from levy of service tax.
In this view, the High Court set aside the notice “to the extent it relates to demand of service tax from the income of the Petitioner from his profession as an individual lawyer.”
It relied on a Coordinate Bench judgment which held that practicing advocates should not face harassment on account of the Department issuing notices calling upon them to pay service tax / GST. “No notice demanding payment of service tax/GST will be issued to lawyers rendering legal services and falling in the negative list, as far as GST regime is concerned…” it was held therein.
At the same time, the High Court granted liberty to the Department to proceed with respect to income from house property as disclosed by the Petitioner, to levy service tax in accordance with law.
Appearance: M.M. Patnaik, Advocate for Petitioner; T.K. Satapathy, Sr. Standing Counsel for Respondent
Case title: Shivananda Ray v. Principal Commissioner CGST and Central Excise. Bhubaneswar and Others
Case no.: W.P.(C) No.6592 of 2025
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