Perusal of Reverse Charge Mechanism in GST
- 1. 1 GOODS AND SERVICE TAX LAWS BY RECIPIENT Under section 9(3) of CGST/SGST, section 7(3) of UTGST Act, 2017 & Section 5(3) of IGST Act, 2017 on Notified categories of Goods or Services or Both BY REGISTERED PERSON Under section 9(4) of CGST/SGST, section 7(4) of UTGST Act, 2017 & Section 5(4) of IGST Act, 2017 on inward supply of taxablegoods or services or both from UNREGISTERED SUPPLIER Exemption to pay CGST/SGST/UTGST on aggregate value of Intra-state supply of Goods or Services or Both up-to Rs.5000 per day from ANY or ALL Un-registered suppliers- Notification No.8/2017-Central Tax/State Tax/UT Tax (Rate) dated 28.06.2017 SCROLL DOWN FOR LIST OF SERVICES SCROLL DOWN FOR LIST OF GOODS PRADEEP GOYAL Chartered Accountant pradeepgoyal@kcsassociates.in
- 2. 2 NOTIFIED SERVICES UNDER RCM Extra in Notification 10- IGST
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- 4. 4 Explanation:- For purpose of this notification, (a)The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification. (b) “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013. (c) The business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services for the purpose of this notification. Extra in Notification No 10-IGST
- 5. 5 NOTIFIED GOODS UNDER RCM
- 6. 6 DETAILED ANALYSIS OF SERVICES UNDER RCM Supplier Recipient Nature of Service Any Person located in Non-Taxable Territory Any Person located in taxable Territory other than Online Non- taxable Recipient Any Service Goods Transport Agency Specified Recipients Transport of goods by road (Who issue consignment note) ( See Note- 1) Arbitral Tribunal Any Service Any Person Body Corporate and Partnershp firm in taxable territory Sponsorship Centre Govt/State Govt/UT/ Local Authority Any Business Entity located in taxable territory All services with some exceptions (See Note-2) Director of Company or Body Corporate Such company or Body Corporate Any Service Any Business Entity located in Taxable territory SERVICES Any Business Entity located in Taxable territory Represential & Legal services before any Court, Tribunal or authority, directly or indirectly An Individual Advocate, senior advocate or Firm of advocates Section 2(16) of IGST Act: Non-taxable online recipient Means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory. Explanation.––For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body:- (i) Set up by an Act of Parliament or a State Legislature; or (ii) Established by any Government, With ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution. Explanation (b) with notification: Body Corporate has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013. SEE NOTE-3
- 7. 7 Author or music composer, photographer, artist, or the like Publisher, music company, producer or the like, located in the taxable territory. Services 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. Recovery agent Banking Co, Financial Institution, NBFC Any services Person located in non-taxable territory Any person in taxable territory Services by way of transportation of goods by a vessel from a place outside india UPTO the custom station of clearance in India Supplier Reciepient Nature of Service Any person carrying insurance business Insurance agent Any services NOTE-1 SPECIFIED RECIPIENTS FOR GTA SERVICES (a) Any registered factory. (b) Any registered society (c) Any co-operative society (d) any person registered under GST (e) Any body-corporate (f) any partnership firm whether registered or not and association of persons; or (g) any casual taxable person; Located in the taxable territory. Explanation (a) to Notification Recipient is the person who PAYS or LIABLE TO PAY freight. NOTE-2 SERVICES PROVIDED BY GOVERNMENT NOT UNDER RCM (EXCEPTIONS) (1) Renting of immovable property, and (2) 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. Explanation (d) to notification: The words and expressions used and not defined in this notification but defined in CGST/IGST/UTGST Act, shall have the same meanings as assigned to them in those Acts.
- 8. 8 How to discharge Reverse Charge Tax Liability For Inward supply of NOTIFIED SERVICES & GOODS AS ABOVE For Inward supply of GOODS OR SERVICES OR BOTH more than Rs.5000 in a day from UNREGISTERED SUPPLIER or SUPPLIERS Issue a PAYMENT VOUCHER at the time of making payment to supplier- as per Rule 52 of CGST Rules 2017 (Section 31(3) (g) of CGST Act, 2017 May issue a consolidated invoice at the end of a month-Section 31(3) (f) of CGST Act, read with Proviso to Rule 46 of CGST Rules It will always be Intra-State Supply & charge CGST & SGST at prescribed rates & on value of respective supplies Reverse Charge Tax liability only can be discharged through payment not by using CENVAT. First pay & than take credit. PROCESS FOR INWARD SUPPLY OF SERVICES AS IN ENTRY NO 1 & 10 OF ABOVE TABLE FOR INWARD SUPPLY OF REST OF SERVICES OTHER THAN ENTRY NO 1 & 10 OF ABOVE TABLE Inward supply- Inter-state Inward supply- Intra-state Pay IGST Pay CGST & SGST
- 9. 9 Law related to Reverse Charge ❖ Section 9(3) of CGST/SGST Act, 7(3) OF UTGST Act & 5(3) of IGST Act. 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) of CGST/SGST Act, 7(4) OF UTGST Act & 5(4) of IGST Act. 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 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. RELEVANT DEFINITIONS Reverse Charge: Section 2(98) of CGST Act, 2017 Reverse charge means The liability to pay tax By the recipient of supply of goods or services or both Instead of the supplier of such goods or services or both Under sub-section (3) or sub-section (4) of section 9, or Under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act. Recipient of supply of goods or services or both: Section 2(93) Recipient of supply of goods or services or both, means:- (a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and FOR SERVICES Notification No. 10-IGST /13-Central Tax, State Tax & UT tax FOR GOODS Notification no. 4- IGST/CGST/SGST/UPGST
- 10. 10 (c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered, And any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied. Goods Transport Agency (Not defined in GST Laws so taken as per service tax act) “Goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. (Section 65(50b) of Finance Act, 1994 as amended) “Goods carriage” has the meaning assigned to it in clause (14) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988). (Section 65(50a) of Finance Act, 1994 as amended) Section 2(14) of Motor Vehicles Act, 1988 Goods carriage means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods; Consignment Note (Not defined in GST Laws so taken as per service tax act) Vide M.F.(D.R) 37B order No. 5/1//2007-S.T., dated 12.3.2007- 2007 (6) S.T.R. (C13) Clarifications on details in consignment note-in Service Tax Rule 4B of Service Tax Rules prescribes that any ‘goods transport agency’ providing service in relation to transport of goods by road in a goods carriage shall issue a consignment note to the customer. In terms of explanation to this rule, the “consignment note” means “a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency”. 2. The Road Transport Agency Association has informed that it may not always be possible for goods transport agency to mention Truck No. on consignment note in respect of small consignments, i.e. consignments that are less than a truck load. In such cases, the transporters have to wait till they accumulate a truck load of small consignments for a particular destination.
- 11. 11 Further, at times some consignments are shifted to other trucks in accordance with the business exigency. These factors make it practically impossible to know the registration number of the truck transporting a particular shipment at the time of booking of cargo. 3. The matter has been examined by the Board. As stated, in case of small consignments, it would not be feasible to mention Truck No. on consignment note as the Truck no. may not be known at the time of booking of cargo. Therefore, in respect of small consignments, where truck number is not known, an endorsement, i.e., “truck number not known” may be made on customers copy of consignment note, against the entry for Truck no. As and when the Truck No. is known, the goods transport agency shall make an entry of trucks no. in their copy of consignment note to satisfy the requirements of said Rule 4B and also for any future reference. Similarly, in case of transhipment of goods, the goods transport agency would make entry of such transhipment, in their copy of consignment note. For example, if goods moves from Delhi to Agra, and is transhipped there for further movement to Mumbai, the goods transport agency would mention in his copy of consignment note, against Vehicle No. as “(i) Delhi to Agra: Vehicle No.-XXX (ii) Agra to Mumbai: Vehicle No.XXXX”. This would satisfy the requirement of the said Rule 4B.
- 12. 12 WHEN TO PAY TAX UNDER RCM TIME OF SUPPLY IN CASE OF REVERSE CHARGE- POINT OF TAXATION (POT) STATUTORY PROVISIONS TIME OF SUPPLY OF GOODS- SECTION 12 OF CGST & SGST/SECTION 21 OF UTGST ACT (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section. (3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates , namely:— (a) The date of the receipt of goods; or (b) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (c) The date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier: PROVISO Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply. LIABILITY TO PAY TAX- ON DATE EARLIEST OF DATE Of receipt of goods DATE Of payment ENTERED in books DATE Following 30 days from supplier’s invoice date DATE Of payment DEBITED IN BANK Not Possible to determine? Date of entry in the books of account of the recipient of supply.
- 13. 13 TIME OF SUPPLY OF SERVICES- SECTION 13 OF CGST & SGST/SECTION 21 OF UTGST ACT (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section. (3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:- (a) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (b) The date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier. PROVISO-1 Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply: PROVISO-2 Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier. LIABILITY TO PAY TAX- ON DATE EARLIEST OF DATE Of payment ENTERED in books DATE Following 60 days from supplier’s invoice date DATE Of payment DEBITED IN BANK Not Possible to determine? NO Date of entry in the books of account of the recipient of supply. Earlier of Date of payment Supply by Associated Enterprises from out of India