Page 146 – Babatax

Under Goods and Service Tax Regime, in normal cases (Forward Charge Mechanism), the supplier of goods/services issue the tax invoice, receive the payment from the customer and pays the tax portion collected to the Government. However, in case of Reverse Charge Mechanism (RCM) under GST, the customer (Recipient of goods/services) pays the tax to the Government. RCM is the new concept of GST regime.

There are two types of RCM provided under GST law:

Section 9(3) of CGST Act : Supply of specified goods / services.
Section 9(4) of CGST Act : Supply of specified goods / services made by unregistered persons to the specified registered persons.

This article covers the list as under Section 9(3) of CGST Act, 2017.

Supply of specified Goods under RCM

As per Notification No.4/2017, dated 28/06/2017, amended from time to time, supply of following Goods is covered under RCM:

S. No.	Supply of Goods	Supplier of Goods	Recipient of Supply
1.	Cashew nuts, not shelled or peeled	Agriculturist	Any registered person
2.	Bidi wrapper leaves(tendu)	Agriculturist	Any registered person
3.	Tobacco leaves	Agriculturist	Any registered person
4.	Silk yarn	Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn	Any registered person
4A	Raw cotton	Agriculturist	Any registered person
5.	Supply of lottery	State Government, Union Territory or any local authority	Lottery distributor or selling agent.
6.	Used vehicles seized and confiscated goods, old and used goods, waste and scrap	Central Government, State Government, Union territory or a Local authority.	Any registered person
7.	Priority Sector Lending Certificate	Any registered person	Any registered person

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Supply of specified services under RCM

As per Notification No. 13/2017, dated 28/06/2017, amended from time to time, under Section 9(3) of the CGST Act, 2017, supply of following services is taxed under RCM:

1. GTA (Goods Transport Agency)

Type of Service: Supply of services by Goods Transport Agency (GTA) in respect of goods transported by road to-

Factory registered under Factories Act, 1948
Society registered under Societies Registration Act, 1860 or any other law
Co–operative Society established under any law
Any person registered under CGST/ SGST/ IGST/ UTGST Act
Body Corporate
Partnership firm including Association of persons
Any casual taxable person located in taxable territory

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However, RCM shall not apply to the services provided by GTA by way of transport of goods by way of carriage of goods by road to :

Department or Establishment of the Central or State Govt. or Union territory
Local Authority
Governmental agencies which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.

Supplier of Service: Goods Transport Agency (GTA) who has not opt to pay GST @ 12%.

Recipient of Service:

Factory registered under Factories Act, 1948
Society registered under Societies Registration Act, 1860 or any other law
Co – operative Society established under any law
Any person registered under CGST/ SGST/ IGST/ UTGST Act
Body Corporate
Partnership firm including Association of persons
Any casual taxable person located in taxable territory

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Example: A LTD, a GTA, who is not paying tax at the rate of 12 % under FCM, providing services of transportation of goods services to B LTD.

In this case, B LTD is liable to pay the tax to the GST department. B LTD will pay only the value of service to A LTD.

2. Legal Services

Type of Service: Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly.

‘Legal service’ means any service provided in relation to advice, consultancy or assistance in any manner and includes representational services before any Court, Tribunal or Authority.

Supplier of Service: An individual advocate including a senior advocate or firm of advocates.

Recipient of Service: Any business entity located in taxable territory.

Example: Mr. Amit, a lawyer, providing consultancy services to BabaTax LTD. In this case, BabaTax Ltd is liable to pay GST to Government. Mr. Amit will not collect GST from the BabaTax Ltd.

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3. Arbitral Services

Type of Service: Services by an Arbitral Tribunal to the business entity.

Supplier of Service: An Arbitral Tribunal

Recipient of Service: Business Entity

Example: Mr. X is representing BabaTax LTD, before the court. Now, BabaTax LTD, is situated in taxable territory and Mr. X is representing them before Court. Hence, BabaTax LTD has to pay tax under RCM to the Government on behalf of Tribunal.

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4. Sponsorship Services

Type of Service: Services provided by way of Sponsorship Service to any body corporate or partnership firm.

Supplier of Service: Any Person.

Recipient of Service: Any body corporate or partnership firm located in the taxable territory.

Example: Mr. Shah is sponsoring cricket league, organized by IPL LTD. As IPL LTD is a business entity located in a taxable territory and it is receiving sponsorship services, it should pay tax on sponsorship services received to the Government on RCM basis.

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5. Government Services

Type of Service: Services supplied by the Central Government, State Government, Union territory or Local authority to Business Entity excluding –

Renting of immovable property and
Services specified below –
1. 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
2. the services in relation to an
  aircraft or a vessel, inside or
  outside the precincts of a port or an airport
3. Transport of goods or passengers

Supplier of Service: Central Government, State government, Local authority, Union Territory.

Recipient of Service: Any business entity located in the taxable territory.

Example: Local authority of Mumbai has rented its land for the parking purposes to the Phoenix Mall. Phoenix Mall, though business entity receiving services from local authority need not to pay GST under RCM as renting of immovable property has been excluded particularly.

5A Services by the Government

Type of Service: 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.

Supplier of Service: Central Government, State government, Local authority, Union Territory.

Recipient of Service: Any person registered under the Central Goods and Services Tax Act, 2017.

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5B Services of transfer of development rights

Type of Service: 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.

Supplier of Service: Any Person

Recipient of Service: Promoter

5C Long term lease of land

Type of Service: 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.

Supplier of Service: Any Person

Recipient of Service: Promoter

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6. Services by the Director

Type of Service: Services supplied by a director of a company or a body corporate to the said company or the body corporate.

Supplier of Service: A director of a company or a body corporate.

Recipient of Service: A company or a body corporate located in the taxable territory.

Example: Mr. Mayank is the director of Google India LTD and charges Rs 1 lakh per sitting fee. As Google India LTD is receiving services from it’s director, it has to pay tax on those services under RCM. In this case, Google India LTD is liable for paying GST on Rs 1 lakh sitting fee.

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7. Insurance Agent Services

Type of Service: Services provided by an insurance agent to person carrying on insurance business.

Supplier of Service: An Insurance Agent

Recipient of Service: Any person carrying on insurance business, located in the taxable territory.

Example: Mr. Ashwin is providing policy renewal services to LIC LTD. As LIC LTD has appointed Mr. Ashwin as it’s agent for insurance business, LIC LTD will be liable to pay tax on RCM basis.

8. Recovery Agent Services

Type of Service: Services provided by a recovery agent to a banking company or a financial institution or a non banking financial company.

Supplier of Service: A recovery agent.

Recipient of Service: A banking company or a financial institution or a non-banking financial company, located in the taxable territory.

Example: Mr. Arnav is recovering debts from the clients of SBI. In this case, Mr. Arnav is acting as recovering agent, as he is recovering debts for the SBI. Mr. Arnav is giving his services to SBI. Hence, SBI needs to pay tax on RCM basis on Arnav’s behalf..

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9. Copyright Services

Type of Service: Supply of Services by a music composer, photographer, artist or the like 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 dramatic, musical or artistic works to a music company, producer or the like.

Supplier of Service: Music composer, photographer, artist, or the like.

Recipient of Service: The Music company, producer or the like, located in the taxable territory.

Example: A.R. Rehman is giving music composition services to Tseries Music Company. Music company (Tseries LTD) will be liable to pay tax on RCM basis.

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9A. Services of Author

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

Supplier of Service: Author

Recipient of Service: Publisher located in the taxable territory.

Provided that nothing contained in this entry shall apply where:-

the author has taken GST registration and filed a declaration, in form at annexure I, that he will pay GST under forward charge.
the author makes a declaration, as prescribed in Annexure II on the invoice issued by him in Form GST Inv-I to the publisher.

Example: Chetan Bhagat writing novels for Rupa & Co. Here, Rupa & Co. will be liable to pay GST on the services received from Chetan Bhagat on RCM basis.

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10. Reserve Bank Services

Type of Service: Supply of services by the members of Overseeing Committee to Reserve Bank of India.

Supplier of Service: Members of Overseeing Committee constituted by the Reserve Bank of India.

Recipient of Service: Reserve Bank of India.

11. Services by DSAs

Type of Service 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).

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

Recipient of Service: A banking company or a non-banking financial company, located in the taxable territory.

Example: Mr. Dhiraj is bringing businesses to PNB bank, by selling new account opening forms. In this case, as PNB is a banking company, it is required to pay GST on the services received by it from Mr. Dhiraj, who is DSA of PNB.

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12. Business Facilitator

Type of Service Services provided by Business Facilitator (BF) to a banking company.

Supplier of Service: Business facilitator (BF).

Recipient of Service: A banking company, located in the taxable territory.

Example: HDFC bank hired Mr. Y as a BF. Mr Y will help the banks in identifying the borrowers, processing their applications etc, without involving in business transactions. HDFC Bank will be liable to pay GST under RCM to Government.

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13. Business Correspondent

Type of Service: Services provided by an agent of business correspondent (BC) to business correspondent (BC).

Supplier of Service: An agent of business
correspondent (BC)

Recipient of Service: A business correspondent, located in the taxable territory.

Example: Siddharth is a representative authorized to offer cash transactions through Airtel Payment banks. Here, Siddharth act as an agent of business correspondent and Airtel Payment Bank being a business correspondent will be liable to pay GST under RCM.

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14. Security Services :

Type of Service: Services provided by way of supply of security personnel provided to a registered person :

Provided that nothing contained in the entry shall apply to,-

(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.

Supplier of Service: Any person other than a body corporate.

Recipient of Service: A registered person, located in the taxable territory.

Example: Bodyguards & co is providing security services to Mr. Salman Khan, registered under GST. In this case, Mr. Salman Khan is registered in taxable territory and receiving security services, he has to pay tax under RCM.

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15. Renting of Motor Vehicle

Type of Service: 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.

Supplier of Service: Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging GST at the rate of 12 per cent to the service recipient.

Recipient of Service: Any body corporate located in the taxable
territory.

Example: Mr. A provides renting of a motor vehicle to a body corporate which is a software company. Body Corporate would have to pay RCM on Services provided by Mr.A.

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16. Lending Securities Services

Type of Service: Services of lending securities of Securities under Lending scheme, 1997 (Scheme). Securities and Exchange Board of India (SEBI) as amended.

Supplier of Service: 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.

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

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