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RCM-Supplies of services under Reverse Charge Mechanism

Supplies of services under Reverse Charge Mechanism E-Magazine on Tax Update Month of Dec-2022 legal-Tax-Guru-small The supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under...

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Supplies of services under Reverse Charge Mechanism

The supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Reverse charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

There are two type of reverse charge scenarios provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/ SGST (UTGST) Act and section 5 (3) of the IGST Act. Second scenario is covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act where taxable supplies by any unregistered person to a registered person is covered.

 

Section 9 Levy and collection

Section 9 (3) of CGST Act-2017 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-2017 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.] 

Section 5 (3) of IGST Act, 2017 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 5 [(4) of IGST Act, 2017 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.] 

Please View in Horizontal Views

S. No.

Description of supply of service

Supplier of service

Recipient of service

1.

GTA Services

 Goods Transport Agency (GTA)

Any factory, society, co-operative society, registered person, body corporate, partnership firm, casual taxable person; located in the taxable territory

2.

Legal Services by advocate

An individual advocate, including a senior advocate or a firm of advocates

advocate, including a senior advocate or a firm of advocates Any business entity located in the taxable territory

3.

Services supplied by an arbitral tribunal to a business entity

An arbitral tribunal

Any business entity located in the taxable territory

4.

Sponsorship Service:-

 Services provided by way of sponsorship to any body corporate or partnership firm

Any person

Any body corporate or partnership firm located in the taxable territory

5.

Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding: –

(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

Central Government, State Government, Union territory or local authority

Any business entity located in the taxable territory

5(A)

Services by the Government: Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (with effect from 25-1-2018.

Central Government, State Government, Union territory or Local Authority.

Any person registered under the Central Goods and Services Tax Act, 2017

5AA

Services by way of renting of residential dwelling to a registered person. Notification No.5/2022-C.T.(Rate), dated 13.07.2022

Any person

Any registered person

5B

Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter.

Any Person

Promoter

5C

Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter.

Any Person

Promoter

6.

Service by the Director:- Services supplied by a director of a company or a body corporate to the said company or the body corporate

A director of a company or a body corporate

The company or a body corporate located in the taxable territory

7.

Insurance Agent Services supplied by an insurance agent to any person carrying on insurance business

An insurance agent

Any person carrying on insurance business, located in the taxable territory

8.

Recovery Agent Services: – Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company

A recovery agent

A banking company or a financial institution or a nonbanking financial company, located in the taxable territory

9.

Copyright Service

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 covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like

Author or music composer, photograph her, artist, or the like

Publisher, music company, producer or the like, located in the taxable territory

9A

Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary works to a publisher.

 

Author

Publisher located in the taxable territory: Provided that nothing contained in this entry shall apply where, –

(i) the author has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017), and filed a declaration, in the form at Annexure I, within the time limit prescribed therein, with the jurisdictional CGST or SGST commissioner, as the case may be, that he exercises the option to pay central tax on the service specified in column (2), under forward charge in accordance with Section 9 (1) of the Central Goods and Service Tax Act, 2017 under forward charge, and to comply with all the provisions of Central Goods and Service Tax Act, 2017 (12 of 2017) as they apply to a person liable for paying the tax in relation to the supply of any goods or services or both and that he shall not withdraw the said option within a period of 1 year from the date of exercising such option;(ii) the author makes a declaration, as prescribed in Annexure II on the invoice issued by him in Form GST Inv-I to the publisher. ”;

 10

Reserve Bank of India

Supply of services by the members of Overseeing Committee to Reserve Bank of India

Members of Overseeing Committee constituted by the Reserve Bank of India

Reserve Bank of India.”.

11.

Services by DSAs : Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs) Effective from 27-7-2018).

Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm.

A banking company or a non-banking financial company, located in the taxable territory.

12.

Services provided by Business Facilitator (BF) to a banking company

Business facilitator (BF)

A banking company, located in the taxable territory.

13.

Services provided by an agent of Business Correspondent (BC) to Business Correspondent (BC).

An agent of Business Correspondent (BC).

A banking company, located in the taxable territory.

14.

Security Services (services provided by way of supply of security personnel) provided to a registered person :  Provided that nothing contained in the entry shall apply to,- (i)(a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Government agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under Section 51 of the said Act and not for making a taxable supply of goods or services; or (ii) a registered person paying tax under Section 10 of the said Act. Sl. No. 12 to 14 vide Notification No. 29/2018-C.T. (Rate) dated 31-12-2018. w.e.f. 1-1-2019)

Any person other than a body corporate.

 

 

A registered person, located in the “taxable territory.”

15.

Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate. Notification No.29/2019-Central Tax (Rate), dated 31.12.2019.

Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6% to the service recipient.

Anybody corporate located in the taxable territory”.

16

Services of lending securities of Securities under Lending scheme, 1997 (Scheme). Securities and Exchange Board of India (SEBI), as amended.  Sl. 16changes have carried vide Notification No.22/2019-C.T (Rate) dated 30.09.2019 with effect from 1’st October, 2019.

Lender i.e. a person who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the scheme of SEBI.

Borrower i.e. a person who borrows the securities under the Scheme through an approved intermediary of SEBI).

 

Advocate Birbal Sharma

Education- M.Com, LL.B, DLL, LLM Practice Courts - Rajasthan High Court, Income Tax Appellate Tribunal and Intellectual Property Right Attorney Contact Number- 09785037216 Email ID-advocatebirbalsharma@gmail.com

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