gst reverse charge · • validity of the collection of service tax from service receiver was...

GST – Reverse Charge

SOCI ET Y FOR TA X A NA LYS IS A ND R ESEA RCH

A PR I L 2 , 2020

CA . (DR . ) GAUR AV GUPTA

PA RT N ER

MGS & CO.

1

Agenda

▪ Concept of RCM

▪ Issues in RCM - Generic

▪ Issues in RCM – Rent a Cab

▪ Issues in RCM – Security Services

▪ Issues in RCM – Govt. Supply

▪ Issues in RCM – Import of Services

© CA. (Dr.) Gaurav Gupta 2

The Concept of RCM

Concept of RCM• First sought to be introduced in 1997 for GTA and clearing Agents under Service Tax

• Finance Act, 1994 was not amended to provide for liability of payment service recipient and amendment was primarily sought by amending Rules

• Held as ultravires the Act by Apex Court in Laghu Udyog Bharati (2006) (2) STR 276 (SC)

• Reintroduced by amendments in charging section vide amendments in 2000 and 2003

• This time upheld by Apex Court in Gujarat Ambuja Cement Ltd. 2006 (3) STR 608 (SC).

• Validity of the collection of service tax from service receiver was upheld in the case of All India Tax Payers Welfare vs Union Of India [(2006) 205 CTR Mad 360, 2006 4 STR 14]

• Purchase Tax also found place in VAT Acts.


Concept of RCM• RCM reproduced under GST

• RCM applicable on notified goods and services

• Notification No. 4/2017-Central Tax (Rate) provides list of goods on which RCM is applicable

• Notification No. 13/2017-Central Tax (Rate) provides list of services on which RCM is applicable


Concept of RCM• Provisions under CGST Act, 2017

• Section 9(3) - Notification No. 4/2017CT(R) & Notification No. 13/2017CT(R)(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

• Section 9(4) – Notification No. 7/2019- CT(R)The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.


Concept of RCM• Goods under RCM

• Cashew nuts, not shelled or peeled• Bidi wrapper leaves (tendu)• Tobacco leaves• Silk yarn• Raw cotton• Supply of lottery• Used vehicles, seized and confiscated goods, old and used goods, waste and scrap• Priority Sector Lending Certificate


Concept of RCM• Services under RCM (subject to specified conditions)

• Services of Goods Transport Agency (GTA) – not applicable on Government, Govt. agency• Services of an Advocate or firm of Advocates• Services of an Arbitral Tribunal• Services of Sponsorship• Services supplied by the Central Government, State Government, Union territory or local authority• Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) • Long term lease of land by any person against consideration in the form of upfront amount• Services supplied by a director of a company or a body corporate• Services supplied by an insurance agent• Services supplied by a recovery agent• Supply of services by a music composer, photographer, artist or the like• Supply of services by an author• Supply of services by the members of Overseeing Committee• Services supplied by individual Direct Selling Agents


Concept of RCM• Services under RCM (subject to specified conditions)

• Services provided by business facilitator (BF) to a banking company• Services provided by an agent of business correspondent• Security services provided to a registered person• Services provided by way of renting of any motor vehicle• Services of lending of securities under Securities Lending Scheme, 1997


Liability on E Commerce Operator

Liability on E Commerce Operator• Neither a supplier nor receiver of Service. S. 9(5) of CGST Act, 2017 - Special Category carved for Online Platforms

• Only notified categories of services if such services are supplied through it.

• Deemed to be supplier of such services

• Notification No. 17/2017 - Central Tax (Rate)• services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle• services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other

commercial places meant for residential or lodging purposes except by registered persons• services by way of house-keeping, such as plumbing, carpentering etc. except by registered persons


Liability on E Commerce Operator


E C

om

me

rce

Op

era

tor Has physical presence in

the taxable territory

Such e-commerce operator shall be liable to

pay tax

Does not have physical presence in the taxable

territory

Any person representing such e-commerce

operator

Such person shall be liable to pay tax

Representative does not have a physical presence

in the taxable territory

The e-commerce operator shall appoint a for paying

tax

Issues in RCM -Generic

Issues in RCM - Generic• Service recipient is required to get himself registered and file returns• Interest and penal provisions in case of delay applicable even under reverse charge• Applicability of Threshold Limit of Rs. 20 / 40 Lakhs• Composition Supplier – are they liable?• Do I need separate registration to discharge my liability under reverse charge?• Can I pay reverse charge liability by Input Tax Credit? – No., as you are not supplier of Goods or services• Can Commercial arrangement shift RCM?• Exemption – is it applicable to RCM also?• Valuation of supplies• ITC reversal in case of supplier whose tax is to be paid by recipient – dual charge


Issues in RCM –Motor Vehicle

CA. GAURAV GUPTA

Issues in RCM – Motor Vehicle• Applicable only on Motor Vehicle

• Renting of Motor Vehicle versus Metered Cab

• No charge of GST on invoice by supplier – is RCM applicable?

• RCM will not apply where cost of fuel is not included in consideration – finance lease

• Notification No. 13/2017-CT(R) dated 28-06-2017, Body Corporate has the same meaning as assigned to it inSection 2(11) of Companies Act, 2013 according to which it includes Companies, Foreign Companies and otherorganizations which are incorporated under any statute

• Is LLP required to pay GST under reverse charge on rent a cab services?


Issues in RCM –Security Services

CA. GAURAV GUPTA

Issues in RCM – Security Services• Valuation of supplies made to Security personnel – ESI, PF, Food, uniform etc.

• Not included• Recruitment agencies• CCTV Security/IT enabled equipment security• Asset Assurance services• Warehousing services• Investigation services• Background Check• Dog sniffer


Issues in RCM –Government Supply

CA. GAURAV GUPTA

Issues in RCM – Government Supply• All Government supplies except specified

• Renting also got covered.

• Limited to Government and local authority – Government authority / Entity / Companies not included

• Exemptions to apply here as well


Issues in RCM –Import of Services

CA. GAURAV GUPTA

Issues in RCM – Import of Services• Ocean Freight – What after Mohit Minerals?

• Secondment from foreign parent Company – Employee or Manpower supplied?

• Repair and Maintenance Sector – Dual charge in case of foreign Supplier


Thank youQUESTIONS?

CA. GAURAV GUPTA 23

gst reverse charge · • validity of the collection of service tax from service receiver was...

Documents