Reverse Charge Mechanism under GST

[Amended up to 1st January, 2020]

 

RCM Rate Chart

 

SERVICES

Sr.

No.

Name of Service Status of Service Provider Status of Service Recipient

 

Description of Service Tax payable by

Recipient

Remarks
1 Import of Services Any Any Any Services provided by a person outside India to any person in India Rate applicable to service Same as existing provision
2 Insurance agent Services Any Any Services provided by an insurance agent to any person carrying on insurance business 18% Same as existing provision
3 Goods Transport by Road (GTA) Any (Who has not opted for 12% Rate Option) Any person other than a non business entity Service provided by the Good Transport Agency (GTA) in respect of transportation of goods by road. 5% Same as existing provision
4 Sponsorship Service Any Person Firm, LLP or Company Service provided by way of sponsorship. 18% Same as existing provision
5 Service by an Arbitral Tribunal Arbitral Tribunal Business entity located in India Service provided by an Arbitral Tribunal 18% Same as existing provision
6 Advocate Service (including Senior Advocates) Individual or Firm of Advocates Any All Legal services 18% Same as existing provision
7 All Services provided by Government or local authority Govt. or Local authority Any business entity Any Service provided by Government or Local authority except a few services 18% Same as existing provision
8 Renting of Immovable property Govt. or Local authority GST Registered Person Renting of Immovable Property 18% Effective from 25/01/2018

 

Sr.

No.

Name of Service Status of Service Provider Status of Service Recipient

 

Description of Service Tax payable by Recipient Remarks
9 Services provided by Directors [See note] Individual Company/ Body Corporate Service provided by Directors 18% Same as existing provision
10 Recovery Agent Services Any Banking Co. or Financial Inst. Or Non-Banking Co. Service provided by recovery agents to certain persons 18% Same as existing provision
11 Goods Transportation by vessel from outside India to Indian Port A person located outside India Importer as defined u/s 2(26) of the Customs Act, 1962 located in India 18% Same as existing provision
12 Transfer or permitting the use or enjoyment of a copyright Author or music composer, photographer, artist, or the like Publisher, Music company, Producer or the like Transfer or permitting the use or enjoyment of a copyright covered under section 13 (1)(a) of the Copyright Act, relating to original literary, dramatic, musical or artistic works 18% Same as existing provision
13 Services provided by Members of Overseeing Committee to RBI Members of Overseeing Committee to RBI Reserve Bank of India Services provided by Members of Overseeing Committee to RBI 18% Same as existing provision
14 Radio taxi, Motor Cab or motor cycle done through an e- commerce operator Taxi driver or Rent a cab operator Any Person Services by way of transportation of passengers by a radio- taxi, motorcab, maxicab and motor cycle; 18% by E- Com Operator Same as existing provision
15 Accommodation Services through an e-commerce operator Unregistered Hotel, inns, clubs etc Any Person services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes 18%

by E- Com      Operator

Same as existing provision

 

Sr.

No.

Name of Service Status of Service Provider Status of Service Recipient

 

Description of Service Tax payable by Recipient Remarks
16 Procurement of goods or service from an unregistered person [See note 9] Any Unregistered person Any Registered person Purchase of any goods and receipt of any service from an unregistered person Rate applicable to goods or service recd From 1.07.2017 to

12.10.2017

16A Procurement of goods or service from an unregistered person [See note 9A] Any Unregistered person Registered builder / developer who has opted to pay tax @5% / 1% Purchase of any goods and receipt of any service from an unregistered person 28% on Cement and 18% on other goods or services From 1.04.2019
17 Services supplied by individual Direct Selling Agents (DSAs) Individual, HUF or Proprietor Bank or non- banking financial company Services supplied by individual Direct Selling Agents (DSAs) 18% No Change from existing provisions
18 Services provided by business facilitator (BF) to a banking Company Business facilitator (BF) A banking company, located in the taxable territory Services provided by business facilitator (BF) to a banking company 18% No Change from existing provisions
19 Services provided by an agent of business correspondent (BC) to BC An agent of business correspond ent (BC) A business correspondent, located in the taxable territory. Services provided by an agent of business correspondent (BC) to business correspondent (BC). 18% No Change from existing provisions
20 Security services (services of supply of security personnel) [Note 10 & 11] Any person other than a body corporate A registered person, located in the taxable territory Security services (services provided by way of supply of security personnel) 18% w.e.f.

1.01.2019

21 Transfer of Development Rights Any Person Builder / Developer Services of TDR or FSI for construction of a project 18% 1.04.2019
22 Long term lease of land (30 yrs +) Any Person Builder / Developer Services of Lease of land for construction 18% 1.04.2019
23 Renting of Passenger Motor Vehicle where Fuel Cost is included [See Note] Any person other than a body corporate paying tax @ 5% Body Corporate located in India Renting of a motor vehicle where the supplier is not charging GST @ 12% and where fuel cost is included 5% w.e.f.

1.10.2019

 

GOODS 

Sr.

No.

HSN Supplier of Goods Recipient of Goods Description of Goods Tax payable by recipient
1 0810 Agriculturist

(See Note 12)

Any registered

person

Cashew nuts, not shelled or peeled Rate

Applicable

2 1404 90 10 Agriculturist Any registered

person

Bidi wrapper leaves (tendu) Rate

Applicable

3 2401 Agriculturist Any registered

person

Tobacco leaves Rate

Applicable

4 5004 to 5006 Manufacture of silk yarn from raw silk or silk worm cocoons Any registered person Silk Yarn Rate Applicable
5 5201 Agriculturist Any registered

person

Raw Cotton Rate

Applicable

6 State Government, Union Territory or any local

authority

Lottery distributor or selling agent. Supply of lottery Rate Applicable
7 Any Chapter Government or Local Authority Any registered person Used vehicles, seized and confiscated goods, old and used goods, waste and scrap Rate Applicable
8 Any Chapter Any registered person Any registered person Priority Sector Lending Certificate Rate Applicable

 

Notes

1. When to Pay GST

In case of RCM based tax payments – the tax becomes payable on the earlier of the following 2 dates:

  1. When the payment to the vendor is made
  2. 30 days from the date of the invoice for purchase of goods
  3. 60 days from the date of the invoice for the service 

2. How to ascertain Status of Service Provider:

We can ascertain the same from the PAN of the party. Normally Service Tax registration number starts from the PAN. Check the 4th digit of PAN. It denotes Status of Party.

4th digit Status
P Individual
F Firm
H HUF
B Body of Individual
A Association of Person (AOP)
L Local Authority
C Company
T Trust
J Artificial Judicial Person

How to ascertain State of Supplier:

We can ascertain the same from the PAN number of the supplier. The GSTIN always contain 1st two digits as State Code.

3. Declaration in Invoice

Every Supplier of goods or services whose supply falls under RCM is required to declare the same in his Tax Invoice

4. Advocates and Arbitral tribunals:

Term “Business entity” is defined in Notification 12/2017 CT (Rate) as under:

2 (n) “business entity” means any person carrying out business;

5. All Services by the Government or Local Authority

In case of all services provided by the Government or Local authority which are taxable under the present service tax law except a few listed below the tax on the same shall be payable by the service

Following services if provided by the Government or Local Authority are not under RCM Recipient has to pay tax on all Services as explained above except the following services on which the Government will pay the tax.

  1. Renting of immovable property
  2. Services by the Department of Posts
  • Services in relation to an aircraft or a vessel
  1. Transport of goods or passengers

6. Services provided by director

Services provided or agreed to be provided by a director of the Company to the said Company would be taxable under RCM wherein the Company would be required to discharge the tax liability.

In our view, only those services will be covered under this head which are provided by the director in the capacity of a director and not otherwise. A director who has rented his office to the company and draws lease rentals will be required to pay tax in his individual capacity and the company will not be required to pay tax on the same under RCM.

Services provided by director who is employee of the company would not get covered under this entry as Schedule III specifically excludes service provided by employee to employer

 7. Security services provided to following organisations will not be under RCM

  1. a Department or Establishment of the Central Government or State Government or Union territory; or
  2. local authority; or
  3. 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
  4. a registered person paying tax under Composition

8.     Time of Supply for Security Services

As Security Services are now brought into the RCM net, question would arise as to the taxability of invoices being raised for period on or before December 2018, who would be liable to pay GST for such past period invoices whose payments are made in January 19 or thereafter. Thumb rule of any tax law is that once a time for payment of tax has been affixed, it cannot be again subjected to the time of supply test. Hence, where the invoice has been issued on or before 31/12/2018, then the Security Service Supplier will be liable to pay tax irrespective of the fact as to when the payment is received by him. If the invoice is made on or after 01/01/2019 then the service recipient would only be liable to pay tax.

There could be 3 different scenarios possible going forward

Services completed and invoice made on or before 31.12.2018 but payment made after 31/12/2018 – As discussed above, Security Service Supplier will be liable to pay tax irrespective of the fact as to when the payment is received by him.

Services completed on or before 31/12/2018 but invoice as well as payment made in January 2019 – Service Recipient will be liable to pay GST

Services completed, invoice as well as payment made on or after 31/12/2018 Service Recipient will be liable to pay GST

9. RCM on Renting of motor vehicle

Services was introduced in GST w.e.f. 01/10/2019 however some doubts arose due to the way the entry was worded. Council has issued notification 29/2019-CTR to reword the entry so that doubts can be

RCM shall be applicable on the service by way of renting of any motor vehicle (MV) when following conditions are met:

  1. MV is designed to carry passengers
  2. Cost of fuel is included in the invoice value
  3. Supplier is not a body-corporate;
  4. Recipient (Customer) is ONLY a body Corporate
  5. Supplier does not issue an invoice charging GST @12% from the service

This provision will be applicable from 1.10.2019 onwards.

Reach us

For a better understanding & discussion of how this issue might affect your company, please contact nexpective advisors

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