rcm under gst - estv.inestv.in/idtc/gstaudit/pdf/rcm ppt-ca.virender chauhan_07072018.pdf · •...

By: Virender Chauhan,

FCA LLB

RCM UNDER

GST

RELEVANT NOTIFICATIONS ALONG WITH EXEMPTIONS 2

REVERSE CHARGE ON NOTIFIED SUPPLIES 1

REVERSE CHARGE ON UNREGISTERED SUPPLIES 3

ISSUES UNDER RCM 4

TOPICS TO BE COVERED

2 © Indirect Taxes Committee, ICAI 07-07-2018

REPORTING REQUIREMENTS 5

EARLIER REGIME


• No RCM on goods

• Purchase Tax on purchase of food grains

• RCM on services-almost pari materia-advocate services,

import of services and sponsorship services etc.

• Partial reverse charge not continuing

EARLIER REGIME

Tax to be paid by

Supplier (Forward Charge)

Recipient (Reverse Charge)

Others

(Third Party)

Persons who pay taxes


CHAPTER-III (LEVY AND COLLECTION)

• 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

S.9(3) REVERSE CHARGE ON NOTIFIED SUPPLIES



Tax Liability discharged by the supplier

Please note that the supplier discharging this liability would

not render the liability discharged, since the law imposes the

obligation on the recipient. The recipient of supply would

nevertheless be liable to discharge the taxes, and the relief

available to the supplier would be only by way of an

application for refund

S.9(3) : POINT TO BE NOTED


REVERSE CHARGE MECHANISM

S. 17(2): Where goods or services or both are used by registered

person partly for effecting taxable supplies and partly for effecting

exempt supplies, the amount of credit shall be restricted to so

much of input tax as attributable to taxable supplies

S. 17(3): The value of exempt supply under S. 17(2) shall include

supplies on which recipient is liable to pay tax on RCM, transaction

in securities, sale of building and sale of land.

RCM limited to S. 9(3) and S. 9(4) [S. 2(98)]

EXEMPT SUPPLY INCLUDES SUPPLIES UNDER RCM


i. Cashew nuts (not shelled or peeled) by agriculturist to any registered person,

ii. Tobacco leaves by agriculturist to any

registered person,

iii. Bidi wrapper leaves (tendu) by

agriculturist to any registered person,

8 GOODS UNDER REVERSE CHARGE

NOTIFICATION NO. 4/2017-CENTRAL TAX RATE DATED 28-JUN-17



iv. Supply of lottery by SG to lottery distributor or agent,

v. Silk yarn by any person who manufactures

silk yarn from raw silk or silk worm cocoons for supply of silk yarn to any registered person




vi. Used vehicles, seized and confiscated goods, old and used goods, waste and scrap by CG/ SG etc. to any registered person [NN-36/2017-Central Tax (Rate)

dt. 13-Oct-17]

vii. Raw cotton by agriculturist to any

registered person [NN-43/2017 dt.14-Nov-17]




viii. Priority Sector Lending Certificates by registered person to another registered person




1. Supply of Services by a goods transport agency (GTA), [who has not paid central tax at the rate of 6%,] [NN-22/2017 – Central Tax (Rate) dt. 22-Aug-17] in respect of transportation of goods by road to-

(a)any factory registered under or governed by the Factories Act, 1948;or

(b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under CGST, SGST, UTGST Acts; or (e) any body corporate established, by or under any law; or

SERVICES UNDER REVERSE CHARGE



(f) any partnership firm (LLP) whether registered or not under any law including association of persons; or (g) any casual taxable person

Located in taxable territory



EXEMPTIONS RELATED TO

GTA

EXEMPTIONS RELATED TO GTA NN-12/2017-Central Tax (Rate)

Heading 9963 or Heading 9972 (Entry No. 18)

Services by way of transportation of goods-

(a) by road except the services of—

(i) a goods transportation agency;

(ii) a courier agency;

(b) by inland waterways.



Heading 9965 or 9967 (Entry No. 21)

Services provided by a goods transport agency, by way of

transport in a goods carriage of—

(a) agricultural produce;

(b) goods, where consideration charged for the transportation of

goods on a consignment transported in a single carriage does

not exceed Rs. 1,500/-;

(c) goods, where consideration charged for transportation of all

such goods for a single consignee does not exceed Rs. 750/-;






(d) milk, salt and food grain including flour, pulses and rice;






(e) organic manure;

(f) newspaper or magazines registered

with the Registrar of Newspapers;






(g) relief materials meant for victims of natural or

man-made disasters, calamities,

accidents or mishap; or

(h) defence or military equipments.




Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely: (a) any factory registered under or governed by the Factories Act,

1948(63 of 1948); or (b) any Society registered under the Societies Registration Act,

1860 (21 of 1860) or under any other law for the time being in force in any part of India; or

(c) any Co-operative Society established by or under any law for the time being in force; or




(d) any body corporate established, by or under any law for the time being in force; or

(e) any partnership firm whether registered or not under any law including association of persons;

(f) any casual taxable person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act.



2. Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly to any business entity located in taxable territory Explanation.- “legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority. [Corrigendum, dated 25-Sep-17 to NN-13/2017-

Central Tax(Rate) dt. 28-Jun-17]




3. Services supplied by an arbitral tribunal to a business entity located in taxable territory



EXEMPTIONS RELATED TO

LEGAL SERVICES

EXEMPTIONS RELATED TO LEGAL SERVICES NN-12/2017-Central Tax (Rate)


Services provided by—

(a) an arbitral tribunal to –

(i) any person other than a business entity; or

(ii) a business entity with an aggregate turnover up to Rs. 20 lakh

(Rs. 10 lakh in the case of special category states) in the preceding

financial year;

(iii) the CG, SG, UT, local authority, Governmental Authority or

Government Entity [Inserted vide NN-02/ 2018-Central Tax (Rate),

dated 25-Jan-2018]





(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 services;

(ii) any person other than a business entity; or

(iii) a business entity with an aggregate turnover up to Rs. 20 lakh (Rs. 10

lakh in the case of special category states) in the preceding financial

year;

(iv)the CG, SG, UT, local authority, Governmental Authority or Government

Entity





(c)a senior advocate by way of legal services to—

(i) any person other than a business entity; or

(ii)a business entity with an aggregate turnover up to Rs. 20 lakh

(Rs. 10 lakh in the case of special category states) in the

preceding financial year.

(iii) the CG, SG, UT, local authority, Governmental Authority or

Government Entity



4. Services provided by any person by way of sponsorship to any

body corporate or partnership firm located in taxable territory




5. Services supplied by the CG, SG, Union territory or local authority to a business entity excluding, - (a) renting of immovable property, and (b) services specified below-

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers.

5A. Services supplied by the Govt. by way of renting of immovable property to a person registered [NN-03/2018-Central Tax (Rate), dated 25-Jan-

18]



EXEMPTION RELATED TO

GOVT. SERVICES

EXEMPTION RELATED TO GOVT. SERVICES NN-12/2017-Central Tax (Rate)

Chapter 99 (Entry No. 7)

Services provided by the CG, SG or local authority to a business entity with an aggregate turnover of up to Rs. 20 lacs in the preceding financial year. Explanation.—For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to— (a) services,—

(i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers; and

(b) services by way of renting of immovable property.


EXEMPTION RELATED TO RENTING OF IMMOVABLE

PROPERTY

EXEMPTION RELATED TO RENTING OF IMMOVABLE PROPERTY

NN-12/2017-Central Tax (Rate) Heading 9963 or Heading 9972 (Entry No. 12)

Services by way of renting of residential dwelling for use as residence.



6. Services supplied by a director of a company or a body corporate to the said company or the body corporate ANALYSIS- Services besides terms of contract of employment [Schedule-III]

Types of directors falls under RCM Non-Executive Directors Nominee Director Independent Directors

Whether any service provided by director to company like renting fall under this category?




7. Services supplied by an insurance agent to any person carrying on insurance business.

8. Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company.

9. Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

10. Supply of services by the members of Overseeing Committee to Reserve Bank of India [NN-33/2017 – Central Tax (Rate) dt. 13-Oct-17]



NOTIFICATION NO. 10/2017-INTEGRATED TAX RATE DATED 28-JUN-17

1. Any service supplied by any person who is located in a non-

taxable territory to any person other than non-taxable online

recipient.

10. Services supplied by a person located in non-taxable territory

by way of transportation of goods by a vessel from a place outside

India up to the customs station of clearance in India (Importer

located in taxable territory)

ONLY CHANGES (IGST-12 SERVICES UNDER RCM)



• The central tax in respect of the supply of taxable goods or

services or both

• by a supplier, who is not registered, to a registered person

shall be paid by such person on reverse charge basis as the

recipient


recipient

S.9(4) REVERSE CHARGE ON UNREGISTERED PURCHASES


EXEMPTION RELATED TO PURCHASE

FROM UNREGISTERE

D SUPPLIER

NOTIFICATIONS FOR EXEMPTION RELATED TO PURCHASE FROM URD

• NN-08/2017-Central Tax (Rate), dated 28-Jun-2017 notified CGST

exemption relating to reverse charge on supplies received from any

or all unregistered persons up to Rs. 5,000/- in a day w.e.f. 1-Jul-

2017.

• NN-38/2017-Central Tax (Rate), dated 13-Oct-2017 amended NN-

08/2017-Central Tax (Rate), dated 28-Jun-2017 and extended the

exemption relating to reverse charge on supplies received from any

or all unregistered persons without any threshold limit till 31-Mar-

2018.

PURCHASE FROM UNREGISTERED SUPPLIER


NOTIFICATIONS FOR EXEMPTION RELATED TO PURCHASE FROM URD

• NN-10/2018-Central Tax (Rate), dated 23-Mar-2018 amended NN-

38/2017-Central Tax (Rate), dated 13-Oct-2017 and further

extended the exemption till 30-Jun-2018.

• NN-12/2018-Central Tax (Rate), dated 29-Jun-2018 amended NN-

10/2018-Central Tax (Rate), dated 23-Mar-2018 and further

extended the exemption till 30-Sep-2018.

PURCHASE FROM UNREGISTERED SUPPLIER


EXEMPTION RELATED TO

PURCHASE BY TDS

DEDUCTOR

NOTIFICATION NO. 9/2017-CENTRAL TAX (RATE) DT. 28-JUN-17

Exemption to TDS deductors from applicability of S.9(4) subject to

the condition that the deductor is not liable to be registered

otherwise than under section 24(vi)


EXEMPTION RELATED TO PURCHASE OF SECOND

HAND GOODS

NN-10/2017-CENTRAL TAX (RATE), DATED 28-JUN-2017

Exemption to registered taxpayers from application of section 9(4)

who are engaged in outward supply of second hand goods in

terms of Rule 32(5)



• The Government may, on the recommendations of the

Council, by notification,

• specify categories of services the tax on intra-State

supplies of which shall be paid by the electronic commerce

operator

• if such services are supplied through it,


electronic commerce operator

S.9(5) E-COMERCE OPERATOR


NOTIFICATION NO. 17/2017 CENTRAL TAX (RATE) DATED 28-JUN-17

• Services by way of transportation of passengers by a radio taxi

etc. and services by way of renting of hotel accommodation, Tax

shall be paid by the e-commerce operator except where supplier

of such service is liable to be registered. [S.9(5)]

• Services by way of house-keeping, such as plumbing,

carpentering etc, except where supplier of such service is liable

to be registered. [NN-23/2017-Central Tax (Rate) dt. 22-Aug-17]

NOTIFIED E-COMMERCE OPERATORS


KEY POINTERS FOR COMPLIANCE

ISSUES UNDER RCM

• Tax to be paid by recipient

• Tax rate, HSN, Valuation- a challenge

• Self Invoice, Payment Voucher under S. 31(3)-procedural lapses-

area of litigation

• ITC available in the month in which payment is made

• Mandatory registration for S. 9(3) (talks about any recipient)

• Reimbursements to employees- procurement through

unregistered suppliers


ISSUES UNDER RCM

• RCM on URD purchases removed from 13-Oct-2017, taxes to be

paid from 1-Jul-2017 to 12-Oct-2017

• Only tax liability is dispensed of, other compliances to be made

and to include supplies from URD under exempt supplies

• Aggregate of inward supplies to be declared in annual return

shall include all inward supplies (taxable inward supplies,

exempt inward supplies, non-GST inward supplies and inward

supplies from composition dealer)


REPORTING REQUIREMENTS

CARO REPORTING-WHERE TO REPORT

• Whether the company is regular in • Depositing undisputed statutory dues including provident fund,

employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues • to the appropriate authorities and if not, • the extent of the arrears of outstanding statutory dues as on the

last day of the financial year concerned • for a period of more than six months from the date they became

payable, shall be indicated;

• “any other statutory dues” indicates dues under GST

Paragraph 3(vii)(a)


CARO REPORTING-HOW TO REPORT


1. Satisfied: Dues including GST regularly deposited in all cases during the year

2. Partially Satisfied: Dues including GST regularly deposited though there has been a slight delay in a few cases.

3. Partially Not Satisfied: Dues including GST have not generally been regularly deposited the delays in deposit have not been serious.

4. Not Satisfied: Dues including GST have not been regularly deposited and there have been serious delays in a large number of cases

DISCLOSURES IN DIRECTOR’S REPORT


• Director Report shall include [S.134(3) of Companies Act]:

Explanation on auditor’s qualification

Directors Responsibility Statement-Compliances

with all applicable laws - Sec 143(3)(c )

NN No.

4/2017 Central Tax (Rate)

10/2017 Integrated Tax

(Rate)


Subject Date

28-Jun-17

28-Jun-17

28-Jun-17


28-Jun-17

S.9(3): Goods under Reverse Charge

S.9(3): Services under Reverse Charge

S.5(3) of IGST: Services under Reverse Charge (Additional to Central Tax)

S.9(4): Exemption upto Rs. 5,000/-

RELEVANT NOTIFICATIONS


NN No.

17/2017 Central Tax

(Rate)



Subject Date

28-Jun-17

22-Aug-17

22-Aug-17

Corrigendum 25-Sep-17

S.9(5): Notified Aggregator Services (Cab, Hotel)

S.9(3): Amnd. In NN-13/2017-GTA Related-12% no reverse charge

S.9(5): Notified Aggregator Services (House keeping)

S.9(3): Scope of legal services



NN No.




Subject Date

13-Oct-17

14-Nov-17

13-Oct-17

S.9(3): Amnd. In NN-13/2017-Overseas Committee

S.9(4): Exemption without threshold till 31-Mar-18

S.9(3): Amnd. In NN-4/2017-to include raw cotton by agriculturist to any RP



13-Oct-17

S.9(3): Amnd. In NN-4/2017-to include used vehicles, seized and confiscated goods, old and used goods, waste and scrap by CG, SG to any RP


NN No.


Subject Date

22-Aug-17 S.9(3): Amnd. In NN-13/2017-Renting of immovable property by Govt.



23-Mar-18 S.9(4): Exemption without threshold till 30-Jun-18


29-Jun-18 S.9(4): Exemption without threshold till 30-Sep-18


28-May-18 S.9(3): Amnd. In NN-4/2017-to include Priority Sector Lending Certificates


Indirect Taxes Committee of ICAI at [email protected] and Register on www.idtc.icai.org for updates and resource material from ICAI


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