VIRTUAL CERTIFICATE COURSE ON GST

GST & INDIRECT TAXES COMMITTEE OF ICAI, NEW DELHI

03.07.2020

CA. HITESH JAIN

HYDERABAD
REVERSE CHARGE
 CONCEPT & PURPOSE OF REVERSE CHARGE

 Tax is BORNED & PAID by the Recipient (but not Supplier)

 Verifiable Source Criteria

 Machinery to recover tax from the Organised Recipient (not Unorganised Supplier)

 Increase tax collection with limited registrations

 Helps in checking tax evasion (Income Tax - 26AS)

 REVERSE CHARGE - TIMELINE

 Finance Act, 1996 - Introduced RCM - GTA & C'n'F Agent Services were covered
 Apex Court declared it ultra vires [Laghu Udyog Bharati Vs UOI (112) E.L.T. 365 (SC) dt.
27.07.1999]
 Finance Act, 1998 – amendment by the Government
 Re-born - 36/2004-ST dt. 31.12.2004 – five services were covered [especially NR SERVICE
PROVIDER]
 Apex Court upheld the provision [Gujarat Ambuja Cements Ltd Vs UOI (182) E.L.T. 33 (SC) dt.
17.03.2005]
 01.07.2012 to 30.06.2017 – Introduced Partial RCM – atleast 15 services were covered
 01.07.2017 – GST – new dimensions were added, removed Partial RCM
 DEFINITION - REVERSE CHARGE
S.2(98)

"reverse charge" means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub-section (4) of section 5 of the Integrated Goods and
Services Tax Act
 DEFINITION – RECIPIENT
S.2(105)
“Recipient” of supply of goods or services or both, means—

 where a consideration is payable for the supply of goods or services or both, the person who is liable to pay
that consideration

 where no consideration is payable for the supply of goods, the person to whom the goods are delivered or
made available, or to whom possession or use of the goods is given or made available; and

 where no consideration is payable for the supply of a service, the person to whom the service is rendered,

and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of
the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or
services or both supplied;
LEVY & COLLECTION
REVERSE CHARGE COVERAGE

S.9(3) S.5(3)
NOTIFIED G/S
CGST/SGST/UTGST IGST

URD SUPPLIER
S.9(4) S.5(4)
&
CGST/SGST/UTGST IGST
NOTIFIED G/S
REVERSE CHARGE – LEVY & COLLECTION
S.9(3) CGST/SGST/UTGST + S.5(3) IGST

The Government may, on the recommendations of the Council, by

notification, specify categories of supply of goods or services or both,
the tax on which shall be paid on reverse charge basis by the recipient
of such 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 the supply of such goods or services or both
REVERSE CHARGE – PRINCIPAL NOTIFICATIONS
S.9(3) CGST/SGST/UTGST + S.5(3) IGST

GOODS
 04/2017-CT(R) dt. 28.06.2017
 04/2017-IT(R) dt. 28.06.2017

SERVICES
 13/2017-CT(R) dt. 28.06.2017
 10/2017-IT(R) dt. 28.06.2017
 REVERSE CHARGE – LEVY & COLLECTION
S.9(4) CGST/SGST/UTGST + S.5(4) IGST

The Government may, on the recommendations of the Council, by notification, specify a class of
registered persons who shall, in respect of supply of specified categories of goods or services or both
received from an unregistered supplier, pay the tax on 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.

Note: The section has been substituted w.e.f. 01.02.2019 onwards. The erstwhile provision did not
mention about the ‘class of registered persons’ & ‘supply of specified categories’.
REVERSE CHARGE – PRINCIPAL NOTIFICATIONS
S.9(4) CGST/SGST/UTGST + S.5(4) IGST

GOODS & SERVICES

 09/2017-CT(R) dt. 28.06.2017
 10/2017-IT(R) dt. 28.06.2017
 07/2019-CT(R) dt. 29.03.2019
 07/2019-IT(R) dt. 29.03.2019
S.9(4) – GOODS & SERVICES
 S.9(4) – GOODS & SERVICES
S. No. Supply from Unregistered Supplier Recipient
1. Supply of such goods and services or both which constitute the
shortfall from the minimum value (i.e., 80%) 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) Promoter
2. Cement

3. Capital Goods

Covers clauses – (i), (ia), (ib), (ic) and (id) of S. No. 03 (Construction Services)
 S.9(4) – GOODS & SERVICES

S. No. Supply from Unregistered Supplier Rate of Tax

1. Inputs 18%
(Except Cement)
2. Inputs Applicable Rate
(Cement)
3. Input Services 18%
4. Capital Goods Applicable Rate

Instruction No. 3/2/2020-GST dated 24.06.2020

It prescribes DRC-03 as the form for paying the shortfall of 80% minimum requirement for
June 30, 2020 compliances.
S.9(4) – GOODS & SERVICES
EXAMPLE

Inputs & Input Services %age of Inputs & Input Whether Inputs received
Services received during from Registered Supplier?
the Financial Year (Y/ N) 80% satisfied – YES
Sand 10 YES
Cement 15 NO RCM applies – YES
Steel 20 YES
Bricks 15 YES WHY???
Tiles 10 YES
Paints 5 YES CEMENT
Architect 10 YES
Plywood 15 YES
S.9(3) - GOODS
 S.9(3) - GOODS
S. No. Description Supplier Recipient
1. Cashew nuts, Agriculturist
not shelled or peeled
[0801]
2. Bidi wrapper leaves (tendu) Agriculturist
[14049010]
Registered
3. Tobacco leaves Agriculturist
Person
[2401]
4. Silk yarn Any person who manufactures silk
[5004 to 5006] yarn from raw silk or silk worm
cocoons for supply of silk yarn
4A. Raw cotton Agriculturist
[5201]
 S.9(3) - GOODS

S. No. Description Supplier Recipient

5. Supply of lottery SG / UT / LA Lottery distributor
or selling agent

6. Used vehicles, seized and confiscated CG / SG / UT / LA Registered Person

goods, old and used goods, waste and scrap
7. Priority Sector Lending Certificate Registered Person Registered Person
(Circular 62/36/2018-GST dt. 12.09.2018)
S.9(3) - SERVICES
 S.9(3) - SERVICES
S. No. Description Supplier Recipient

1 Services by a GTA who has not paid tax GTA  Factory under Factories Act, 1948
at the rate of 12% in respect of  Society registered under Societies
transportation of goods by road. Registration Act, 1860 or any law in India
 Co-Op Society under any law
Not applicable to -  Person registered under GST
 Dept of CG/SG/UT  Body Corporate under any law
 LA  Partnership/AOP, registered or not
 Govt Agencies  CTP in Taxable Territory
Registered only for S.51 i.e., GST-TDS &
not involved in any taxable supplies
 Goods Transport Agency means any person who provides service in relation to transport of
goods by road and issues consignment note, by whatever name called.
 Consignment note not defined in GST.
 Who is Recipient?? – Person who pays freight or liable to pay freight
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
2 Legal services  Individual Advocate Business Entity in
 Senior Advocate taxable territory
"Legal service" means any service  Firm of Advocates
provided in relation to advice,
consultancy or assistance in any branch
of law, in any manner and includes
representational services before any
court, tribunal or authority.
Advocate/Senior Advocate as per Advocates Act, 1961

Advocate ≠ Lawyer
 S.9(3) - SERVICES
LEGAL SERVICES BY SERVICES TO TAXABILITY
Individual Advocate Advocate/Firm of Advocates EXEMPTED

Or Non-Business Entity EXEMPTED

Unregistered Business Entity EXEMPTED
Firm of Advocates CG/SG/UT/LA/GA/GE EXEMPTED
Business Entity having Agg. Turnover> 20Lacs, located in RCM
a Taxable Territory
Senior Advocate Advocate/Firm Of Advocates FCM

Non-Business Entity EXEMPTED

Unregistered Business Entity EXEMPTED
CG/SG/UT/LA/GA/GE EXEMPTED
Business Entity having Agg. Turnover> 20 Lacs, located RCM
in a Taxable Territory
 S.9(3) - SERVICES
S. No. Description Supplier Recipient

3 Arbitral tribunal to a business An arbitral tribunal Business entity in the taxable

entity. territory.
Exemption:
 To Non-Business Entity
 Business Entity having Agg. Turnover< 20Lacs, located in Taxable Territory
 CG/SG/UT/LA/GA/GE
4 Sponsorship Any person Body Corporate or
Partnership Firm in taxable
Sponsorship not defined in territory.
GST.
 S.9(3) - SERVICES
S. No. Description Supplier Recipient

5 Services by CG/SG/UT/LA to a Business CG/SG/UT/LA Business entity located

Entity, excluding: in taxable territory
 Renting of immovable property
 Postal, Life Insurance & Agency
Service to other than CG/SG/UT/LA
 Aircraft or Vessel
 Goods Transport
 Passengers Transport
5A Renting of immovable property services CG/SG/UT/LA Registered person
by CG/SG/UT/LA to a person registered under GST
under GST.
S.9(3) – SERVICES

Registered RCM

Commercial Taxable
Renting of
Immovable
Unregistered FCM
Property by
CG/SG/UT/LA
Residential Exempted
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
5B Services by any person by way of transfer of development Any Person Promoter
rights or floor space index (FSI) (including additional FSI)
for construction of a project by a promoter.
5C Long term lease of land (30 years or more) by any person Any Person Promoter
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.
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
6 Services supplied by a director of A director of a The company or a body
a company or a body corporate company or a body corporate located in the
to the said company or the body corporate. taxable territory.
corporate.
Circular 140/10/2020-GST dated 10.06.2020
 Schedule III - Employer & Employee – ‘Contract of Employment’
 Non Employee Directors – RCM applies
 Dual Capacity Directors – S.192 vs. S.194J
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
7 Services supplied by an insurance An insurance Any person carrying on
agent to any person carrying on agent insurance business, located in
insurance business. the taxable territory.
8 Services supplied by a recovery A recovery agent A banking company or a
agent to a banking company or a financial institution or a non-
financial institution or a non- banking financial company,
banking financial company. located in the taxable
territory.
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
9 Services by a music composer, photographer, Music composer, Music company, producer or
artist or the like by way of transfer or permitting photographer, the like, located in the
the use or enjoyment of a copyright relating to artist, or the like taxable territory.
original dramatic, musical or artistic works to a
music company, producer or the like.
10 Services by an author by way of transfer or Author Publisher located in the
permitting the use or enjoyment of a copyright taxable territory, except
relating to original literary works to a publisher. when the Author follows the
Annx-I & Annx-II procedure,
as a Registered Person
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
11 Services supplied by individual Direct Individual Direct A banking company or a non-
Selling Agents (DSAs) other than a body Selling Agents (DSAs) banking financial company, located
corporate, partnership or limited other than a body in the taxable territory.
liability partnership firm to bank or non- corporate,
banking financial company (NBFCs) partnership or
limited liability
partnership firm
12 Services provided by business facilitator Business facilitator A banking company, located in the
(BF) to a banking company (BF) taxable territory

13 Services provided by an agent of An agent of business A business correspondent, located

business correspondent (BC) to business correspondent (BC) in the taxable territory
correspondent (BC)
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
14 Security services (services provided by way of Any person A registered
supply of security personnel) provided to a other than a person, located
registered person: body in the taxable
corporate territory.
Not applicable to -
 Dept of CG/SG/UT
 LA
 Govt Agencies
registered only for S.51 i.e., GST-TDS & not
involved in any taxable supplies
 Registered person paying tax under S.10
 S.9(3) - SERVICES
S. No. Description Supplier Recipient
15 Renting of any motor vehicle Any person, other than a body Any body corporate
designed to carry passengers where corporate who supplies the service located in the
the cost of fuel is included in the to a body corporate and does not taxable territory.
consideration charged. charge tax at the rate of 12% to the
(Circular 130/2019 dt 31.12.19) service recipient
16. Lending of securities under Securities Lender i.e. a person who deposits Borrower i.e. a
Lending Scheme, 1997 of SEBI. the securities registered in his person who
name or in the name of any other borrows the
person duly authorised on his securities under
behalf with an approved the Scheme
intermediary for the purpose of through an
lending under the Scheme of SEBI approved
intermediary of
SEBI.
 S.9(3) – SERVICES
INTEGRATED TAX
S. No. Description Supplier Recipient
17. Service supplied by a person located in Any person located Any person located in
non-taxable territory to any person in a non-taxable the taxable territory
other than non-taxable online territory. other than non-taxable
recipient (NTOR). online recipient.

NTOR:
 Govt/LA/GA
 Individual
 Other person not registered & receiving OIDAR Services for OTHER THAN
commerce, industry, trade or any other business, profession
located in Taxable Territory
 S.5(3) – SERVICES
INTEGRATED TAX
S. No. Description Supplier Recipient
18. Services supplied by a person located in non- A person Importer located
taxable territory by way of transportation of located in non- in the taxable
goods by a vessel from a place outside India up taxable territory territory
to the customs station of clearance in India.

Ocean Freight:
 CIF Imports – who takes the services from the transporter???
 Gujarat High Court has declared this as ‘unconstitutional’
[Mohit Minerals P Ltd Vs. UOI dt. 23.01.2020]
OTHER ISSUES
 OTHER ISSUES
Registration Mandatory for recipient under S.24, irrespective of the Aggregate
Turnover.
If supplier is only in RCM supplies, registration not required under
S.23.
Time of Supply S.12 [Goods] & S.13 [Services]
Value of Supply Transaction Value Vs. Valuation Rules
Exemptions Available
Rate of Tax Applicable rate Vs. Ad-Hoc rate [ under 9(4)]
Payment of Tax E-Credit Ledger Vs. E-Cash Ledger
ITC Eligibility Subject to payment of tax liability in the hands of Recipient
Return Filing GSTR-3B vs. GSTR-1 vs. GSTR-9 vs. GSTR-9C
Documentation Self Invoice for URD
SELF GENERATED INVOICE
SAMPLE TEMPLATES
 SELF GENERATED INVOICE (GOODS)

MISCELLANEOUS ISSUES ABC INDIA PRIVATE LIMITED

POST BOX NO 2639 GUINDY, CHENNAI - 600032, TAMIL NADU

SELF INVOICE
Supplier's Particular:
GSTIN - NA
Invoice Particular:
Invoice No. -
Name - Invoice Date -
State Name - Buyer's Order No. & Date - NA
State Code - Despatched through - NA

Buyer's Particular:
ABC INDIA PRIVATE LIMITED <Address Line>
GSTIN - State Name -
CIN - State Code -
Place of Supply -

Transporter's Particular:
<Name> No. of Transportation Days -
<Vehicle No.> Distance -

Particulars (Descriptions & Specifications) HSN / SAC Qty Rate Discount Amount

Taxable Value
CGST @ XX%
SGST @ XX%
IGST @ XX%
Total Value

Is GST payable under Reverse Charge Yes/No

Total Invoice Value (in words) :
Total Tax Value (in words) :
The Invoice is prepared by us as per sec. 31 (3) (f) of the CGST Act, 2017 For …..........................................

The Tax in the invoice has been paid under reverse charge for the procurement from unregistered person.
Authorised Signatory
 SELF GENERATED INVOICE (SERVICES)
ABC INDIA PRIVATE LIMITED
POST BOX NO 2639 GUINDY, CHENNAI - 600032, TAMIL NADU

Supplier's Particular: Invoice Particular:

GSTIN - NA Invoice No. -
Name - Invoice Date -
State Name - Buyer's Order No. & Date - NA
State Code - Despatched through - NA

Buyer's Particular:
ABC INDIA PRIVATE LIMITED <Address Line>
GSTIN - State Name -
CIN - State Code -
Place of Supply -

Particulars (Descriptions & Specifications) HSN / SAC Amount

Taxable Value
CGST @ XX%
SGST @ XX%
IGST @ XX%
Total Value

Is GST payable under Reverse Charge Yes/No

Total Invoice Value (in words) :
Total Tax Value (in words) :
The Invoice is prepared by us as per sec. 31 (3) (f) of the CGST Act, 2017 For …..........................................

The Tax in the invoice has been paid under reverse charge for the procurement from unregistered person.
Authorised Signatory
 Thank You...!

Stay Healthy & Stay Safe

CA. Hitesh Jain

+91 99 66 422 265
hitesh@ssaca.in

The information contained in the paper carry the views of the paper writer and are not intended to address the facts and circumstances of any
particular individual or entity or situation. There can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. Every effort has been made to avoid errors or omissions in this write-up. In-spite of this, errors may have crept
in. Any mistake, error or discrepancy noted may be brought to the notice of the paper writer.