Reverse charge (RCM) and notifications issued for levy and collection of GST under RCM
Introduction: under GST the liability to pay tax is generally on the supplier of goods or services but in some of the cases recipient of the supply of goods or services is held liable for payment of GST which is known as reverse charge tax liability. A similar mechanism was there under VAT/sales tax, where a registered dealer was liable to pay tax on inward supply from an unregistered supplier, under excise on purchase of molasses, custom duty on import of goods to be paid by the person importing goods, and also in service tax where recipient in respect of the certain supply of service was liable to pay service tax under section 68(2) of the Finance Act 1994 read with notification 30/2012. Now similar provisions under GST with an extension of more goods and services. interestingly in the notification of RCM, in certain cases, there is an option to charge GST and pay tax by the supplier of service for example GTA operator, author etc. However, if such an option is not availed by the supplier, the recipient has to pay tax under RCM liabilities.
Meaning of reverse charge: As per Section 2(98) of the CGST Act “reverse charge” means the liability to pay tax by the recipient of the supply of services or goods instead of the supplier of such services or goods under sub-section (3) or sub-section (4) or under sub-section (3) or sub-section (4) of section 5 of IGST Act.
Notifications issued for levy of GST under reverse charge
(A) Notified supply of goods under reverse charge u/s 9(3) of CGST/SGST/ 5(3)of IGST
(B) Notified supply of services under reverse charge u/s 9(3)/ 5(3) of CGST/SGST/ 5(3)of IGST
(A) Notified supply of goods under reverse charge u/s Section 9(3) of CGST Act.
Note: similar notification no 4/2017-integrated Tax (Rate), dated 28-6-2017 for RCM on certain supply of goods.
(B) Notified supplies of services levy & collection of tax – reverse charge
Note: Similar notification no 13/2017-CENTRAL TAX (RATE), DATED 28-6-2017 amended time to time and Notification No 13/2017 – Union territory Tax(Rate)
Section 9(4) reverse charge:
The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of the supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on a 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.
Notification No. 7/2019-Central Tax (Rate), dated 29-3-2019 AS AMENDED BY NOTIFICATION NO. 24/2019-CENTRAL TAX (RATE), DATED 30-9-2019
NOTIFICATION NO. 7/2019-CENTRAL TAX (RATE), DATED 29-3-2019
AS AMENDED BY NOTIFICATION NO. 24/2019-CENTRAL TAX (RATE), DATED 30-9-2019
In exercise of the powers conferred by sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies that the registered person specified in column (3) of the table below, shall in respect of supply of goods or services or both specified in column (2) of the Table below, received from an unregistered supplier shall pay tax on reverse charge basis as recipient of such goods or services or both, namely:—
|Sl. No.||Category of supply of goods and services||Recipient of goods and services|
Supply of such goods and services or both [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges, etc.) or FSI (including additional FSI)] which constitute the shortfall from the minimum value of goods or services or both required to be purchased by a promoter for construction of project, in a financial year (or part of the financial year till the date of issuance of completion certificate or first occupation, whichever is earlier) as prescribed in Notification No. 11/ 2017-Central Tax (Rate), dated 28th June 2017, at items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table, published in Gazette of India vide G.S.R. No. 690, dated 28th June, 2017, as amended.
|2||Cement falling in Chapter Heading 2523 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).||Promoter.|
Capital goods falling under any chapter in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) supplied to a promoter for construction of a project on which tax is payable or paid at the rate prescribed for items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table, in the notification, No. 11/2017-Central Tax (Rate), dated 28th June 2017, published in Gazette of India vide G.S.R. No. 690, dated 28th June, 2017, as amended.
Explanation.—For the purpose of this notification,—
the term “promoter” shall have the same meaning as assigned to it in clause (zk) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);
A ‘promoter’ has been defined in Section 2(zk) of RERA as follows:
As per 2(zk) of RERA act 2016 “promoter” means:
(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
(iii) any development authority or any other public body in respect of allottees of—
(a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
(b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or (iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or (v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public.
Explanation.—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;
|(ii)||“project” shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP);|
|(iii)||the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);|
|(iv)||“Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15 per cent of the total carpet area of all the apartments in the REP.|
the term “floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built.
- This notification shall come into force with effect from the 1st of April, 2019.