Registered person must pay GST under reverse charge for transport and security services despite manufacturing exempted goods under HSN 23099020.

The AAR held that a registered person receiving goods transport agency and security services must pay GST under reverse charge mechanism despite being a manufacturer of exempted goods under HSN 23099020. The authority ruled that Section 9(3) of CGST Act 2017 makes the recipient liable for GST on notified services regardless of their own supply exemptions. GST liability is determined independently for each supply, and exemption on outward supplies does not affect reverse charge obligations on inward supplies received by the taxpayer.

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Issues:
Determining liability to pay GST under Reverse Charge Mechanism for services procured by a manufacturer and supplier of exempted goods.

Analysis:
1. Admissibility of the Application:
The issue pertains to the determination of tax liability on goods or services, making it admissible under Section 97(2)(e) of the CGST Act 2017.

2. Brief Facts of the Case:
The applicant, a manufacturer and supplier of exempted animal feeds, utilizes services of Goods Transport Agencies (GTA) and Security Services falling under Reverse Charge Mechanism (RCM). The applicant sought a ruling on whether they are liable to pay GST under RCM for these services.

3. Applicant's Interpretation of Law:
The applicant argues that since they deal with exempted goods, the RCM Notification No. 13/2017 dated 28.06.2017 should not apply to them.

4. Findings and Discussion:
The judges noted that the CGST Act and KGST Act are similar unless specifically mentioned. They considered the applicant's submissions, the issues involved, and relevant provisions during the hearing.

5. Levy and Collection Analysis:
Reference was made to Section 9(1) and 9(3) of the CGST Act regarding the levy and payment of GST under reverse charge basis. The judges highlighted the relevant provisions and notifications specifying services under RCM.

6. Table Analysis:
The table appended in the judgment lists categories of services under RCM, including services by GTA and Security Services. The applicant, being a registered person, falls under the recipient category for these services.

7. Liability Determination:
The judges emphasized that the recipient of services covered under RCM is liable to pay GST, regardless of the exemption status of their outward supplies. Each supply's taxability is independent, and exemption for outward supplies does not affect RCM liabilities for received services.

8. Ruling:
The final ruling stated that the applicant is indeed liable to pay GST under RCM for the services covered under RCM, despite being a manufacturer and supplier of exempted goods.

This comprehensive analysis of the judgment provides a detailed understanding of the legal reasoning and conclusions reached by the Authority for Advance Rulings in Karnataka.

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