Goods and Services Tax – GST – By: – Senguttuvan Kuppusamy – Dated:- 23-9-2017 Last Replied Date:- 18-7-2018 – Scope of Reverse Charge Mechanism (RCM) provisions under GST is widely different from RCM provisions under Service Tax (ST) Laws. Under ST provisions, RCM was applicable only for Services; and most of the services notified for RCM were common for manufacturing industry. Under GST, the general understanding is that even if one doesn t have to pay GST on the rendered services by him, he has to register himself, if he avails services which have the obligation/duty of paying under RCM. Now the disputed question is, whether registration itself is necessary for the persons covered u/s 23(1) of CGST Act 2017? Section 9(3) and 9(4) of CGST Act, 2017 elucidates the situations where in tax is payable by the registered person under Reverse charge. The provision is reproduced below for further reference (3) The Government may, on the recommendations of the Council, by notification, speci
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ovisions for Registration under CGST The provisions for registration under CGST Act, 2017, are contained in Chapter VI, (Registration). The provisions are reproduced below for further reference – 22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees. As per the provisions mentioned hereunder, if any of the following conditions exists, it becomes mandatory for a person to register under GST. A state from where the person is making outward supply of goods/services. If aggregate turnover of a person from state from where the outward suppli
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arding RCM as per Section 9(3) & (4) of CGST Act, 2017 shall apply, if there is a receipt of supply as contemplated u/s 9(3) & (4). Person not liable to pay Goods and Services Tax As far as a registered person is concerned with respect to RCM provisions the position is clear. This creates a conjecture with respect to applicability of RCM provisions on the persons who are not liable to pay under GST. There are 2 situations under which, Registration provisions will not be applicable- A person who does not qualify for registration i.e. whose aggregate turnover for a financial year is less than 20 lakhs as per the provisions contained in Section 22(1) of CGST Act, 2017. A person indulged in supply exempted goods/services as per the provisions contained in section 23(1) of CGST Act, 2017. RCM applicability on person not liable to register Whether RCM provisions shall be applicable on persons not liable to register as per Section 22(1)? YES. RCM shall be applicable on person not liab
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upplies attracting payment under Reverse charge i.e. whether a person s supplies are more than or less than 20 lakhs has no importance whatsoever under this clause. If a person is effecting supplies under reverse charge he has to get registered. Whether RCM provisions shall be applicable on person who renders exempt supplies as per Section 23(1)? No. RCM provisions shall not be applicable on person rendering exempt supplies Section 23 of CGST Act, 2017 elucidates two conditions – Person effecting exempt supplies Agriculturist. The relevant part is reproduced hereunder for further reference 23. (1) The following persons shall not be liable to registration, namely:- (a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act; (b) an agriculturist, to the extent of supply of produce out of cultivation of land. (2) The Government may, on the r
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