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Reverse Charge and the Place of Supply, Goods and Services Tax - GST
|Reverse Charge and the Place of Supply|
Reverse Charge (RCM) and the Place of Supply (POS)
1. If we read carefully, we would observe that the POS provisions under the IGST Act are made in relation to the Supplier.
2. GST is destination-consumption based tax except in few circumstances, such as, immovable property, right to admission, etc. Thus, tax must reach the state where the Recipient is located.
3. In the case of RCM goods/services, the Recipient is deemed as a supplier to pay tax u/s 9(3).
5. Suppose, Delhi BE (business entity) receives legal services from Delhi Advocate → Delhi BE will pay C+S [CGST+SGST].
Suppose, Delhi BE receives legal services from Mumbai Advocate → Delhi BE is deemed as supplier and is also a Recipient → Thus, supplier and recipient, both are in Delhi → Further, destination of supply and POS u/s 12(2) of the IGST Act is Delhi → Hence, in this case also Delhi BE should pay C+S even though Delhi BE and Mumbai Advocate are in different states.
6. Take another case: Suppose, Delhi registered BE receives renting services from Delhi Landlord (property at Delhi) → Delhi BE will pay C+S.
Suppose, Delhi BE receives renting services from Mumbai Landlord (property at Delhi) → then also Delhi BE should pay C+S because immovable property and the POS u/s 12(3) of the IGST Act is in Delhi → Hence, in this case also Delhi BE should pay C+S even though Delhi BE and Mumbai Landlord are in different states.
7. Take another case: Suppose, Delhi registered BE receives renting services from Mumbai Landlord (property is at Gurgaon, Haryana) → since the immovable property is located in Haryana, tax should reach in Haryana → POS is Haryana u/s 12(3) of the IGST Act as the property is in Haryana → In this case, Delhi BE should pay IGST (POS at Haryana) to achieve the basic intention of the GST.
Open for discussion
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For RCM under GST, the recipient is not deemed the supplier. He is only regarded as the person liable to pay GST.
You are right Shilpi ji: He is deemed as a supplier for limited purposes.
But the main issue and discussion remain.... when IGST is applicable in the RCM transactions?? Should the Recipient not decide the POS of the transaction in the shoes of the Supplier (instead of him as a supplier)?
Sec 12(8) The place of supply of services by way of transportation of goods, including by mail or courier to,––
(a) a registered person, shall be the location of such person;
In Service Tax law, under RCM the recipient was deemed service provider. Case laws to this effect are available.
The phrase, 'limited purposes' is not independent of the criteria for determination of place of supply of service under RCM.
Similarly, the words, 'only for person liable to pay GST' used by Madam Shilpi Jain is also not independent of the criteria for determination of place of supply of service under RCM.
As per legal dictionary, the word, 'deemed' has very wide scope.
In this context, I agree with the views taken by Shri Kasturiji Sir.
Some principles for interpreting the statute is as under :-
“It was contended that a statute must be read as a whole and then chapter by chapter, section by section, and then word by word. For the said purpose, the scheme of the Act must be noticed. If the principle of interpretation of statutes resorted to by the Court leads to a fair reading of the provisions, the same would fulfill the conditions of applying the principles of purposive constructions.” -Hon’ble SC
“It is well-settled principle that while interpreting a statute, the interpretative function of the court is to discover the true legislative intent. A statute is best interpreted when we know why it was enacted. It must be read, first as a whole, and then section by section, clause by clause, phrase by phrase and word by word and therefore, taking into consideration the contextual connotation and the scheme of the Act, its provisions in their entirety”
“'The key to the opening of every law is the reason and spirit of the law, it is the animus imponentis, the intention of the law maker expressed in the law itself, taken as a whole.” -Hon’ble SC
“The conclusion that the language used by the legislature is plain or ambiguous can only be truly arrived at by studying the statute as a whole. Words take colour from the context in which they are used, keeping pace with the time. Words used as an adjective draws colour from the context too. The same word may mean one thing in one context and another in different context, therefore, the same word used in different sections of a statute or even when used at different places in the same clause or section of a statute may bear different meanings. That is why it is necessary to read the statute as a whole in its context.”
I am sorry to say that we have been diverted from the main query..... which is.....
1. How and under what circumstances IGST (instead of CGST + SGST) is payable in RCM Transactions?
2. Having a macro analysis of the GST structure... tax is payable in a manner ["C+S" or "I"] so that it should reach to the state where POS falls.
3. If the Recipient and POS are in the same state, and if the actual supplier is located in another State, should the Recipient pay RCM under the "IGST" or "C+S"?
We are not diverted from the discussion, but as you know the definition of term supply is wider. Further, GST is indirect tax regime, consisting of supply of goods or services or both, therefore, interpretation for supply of goods and services are to be viewed as per the facts and circumstances of the case, terms and conditions of contract, transaction type, in short various factors are to be taken into account.
The point raised by you is general in nature and may not be applicable to specific supply. Therefore, few principles of interpretation were given. In either case, this can be endless discussion.
Sh.Alkesh Jani Ji,
You have grasped, interpreted and analyzed the issue holistically and insightfully. The word, 'deemed' is the pillar of the whole discussion. You have not side-tracked at all.
The point here is that you cannot regard the recipient as the supplier while determining which tax has to be charged.
The recipient is still only the recipient only even though he is the person paying the tax. The location of the actual supplier and the PoS if in different State, IGST will apply.
There are many instances where IGST is liable for RCM.
Pls share your specific service to let you know when IGST can be charged.
If IGST is paid in lieu of CGST+SGST and vice versa, it will be treated as a procedural lapse, as no revenue loss is caused/involved. The assessee has not to pay interest in terms of Section 77(2) of CGST Act.Regarding the sharing of GST between Central Govt. and State Govt., revenue from IGST is also apportioned among Union and States. Articles 269 A(2) and 270(1A) of Constitution of India refer.