RCM – Applicability to persons not liable to get registered us 23(1)
By: – Senguttuvan Kuppusamy
Goods and Services Tax – GST
Dated:- 23-9-2017
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 th
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rvices availed from an unregistered dealer by a registered dealer
Provisions 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/serv
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ate from where such outward supplies are made
Therefore, on such persons the provisions regarding 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
compulsory registration under GST.
It is compulsory for a person to get registered under GST if he is making supplies 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 T
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
not applicable.
RCM services as per notification
Notifications 13/2017 of CGST Act, 2017 and corresponding Notification in 10/2017 of IGST Act 2017 provide category of services on which the tax shall be paid under Reverse Charge Mechanism under CGST Act.
Since, sec 23 is intact and provision regarding compulsory registration (sec 24) is not applicable on such persons. It can be safely concluded that, the persons providing only exempted services such as Legal services, GTA services etc, shall not come under RCM provisions being recipient of supplies covered u/s 9(3) & (4)
Reply By RENGARAJ R.K as =
Sir,
I am running poultry farm and my supplies are exempted under GST as my hsn code is 0105 (which attract nil rate). I am not a registered dealer by virtue of section 23 of the CGST Act.
Suppose i pay ₹ 10,000 as legal fees to advocate, whether i am liable to pay tax under RCM u/s 9 (3) and also i have to get myself registered compulsorily u/s 24.
regards
raj
Dated: 18-7-2
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
