Reverse charge mechanism

[Yatin Bhopi]

Dear Sir

We are manufacturer and having One registration for Four Units in Maharashtra only. Our query is related to reverse charge mechanism in transitional period.

Bill dated prior to 1^st July 2017 liable to pay service tax (under reverse charge mechanism in Service Tax ) for services like Manpower service, rent-a-cab, works contract etc. paid to supplier from 1^st July 2017. Since liability to pay Service tax arise after payment made to supplier in Service tax, Whether we need to pay service tax or GST on such services(again these services ae not liable to tax under reverse charge in GST)

[KASTURI SETHI]

Manpower Service and works contract service (partial) are out of RCM in GST but rent-a-cab is still under RCM. You will pay Service Tax for all three services which were under RCM before 1.7.17. Only payment will be made in July, 17. It is also assumed that service has been provided and invoice also has been issued prior to 1.7.17. In my view GST is not applicable in this situation.

[DR.MARIAPPAN GOVINDARAJAN]

You have to pay the tax on reverse charge mechanism once you received the bill on or before 6th of the following month, irrespective of the fact, whether you pay the bill or not. You ought to have paid the service tax by 6th July, 2017.

AI Summary

Reverse charge mechanism: pre-GST invoices remain subject to service tax under RCM, with payment obligation on bill receipt.
Where services were provided and invoiced before the GST transition, the pre-existing service tax reverse charge mechanism governs those supplies even if payment occurs after transition; manpower and certain works contract services are out of GST RCM while rent-a-cab remains under RCM, but for pre-transition invoices service tax applies. Separately, under the prior regime RCM tax became payable upon receipt of the bill within the statutory window (by the sixth day of the following month), regardless of actual payment to the supplier.