GST under RCM for Court Fee paid - APplicable or Not payable/applicable

[venkataraman swaminathan]

Dear Sir

In connection with Amalgamation activity , the Court Approinted one Liquidator and

expecting Orders from the Court for amalgamation activity. In this connection we need to pay some amount to the Court as per the Court Letter , & inturn court will pay to the Liquidator as fee. For our Payment by DD court will give receipt .

In this transaction , for our payment of the money paid to Court , fall under RCM or not

GST under RCM is payable or not payable. We need Guidance on this please.

Thanking you

V Swaminathan

[Rajagopalan Ranganathan]

Sir,

According to Sl. No. 2 of Schedule III of CGST Act, 2017 "Services by any court or Tribunal established under any law for the time being in force SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES. However you say that the amonyt payable by you will be paid by the Court as fee to the liquidator. If the letter issued by the Court clearly indicate that the amount to be deposited by you will be the fee payable to the liquidator then you have to pay gst under RCM since liquidator is not an employee of you or your organization.

[venkataraman swaminathan]

Dear Sir

Thanks for the guidance on this. Can we take ITC Credit under RCM for the GST paid under RCM for this legal expenses. Kindly confirm please. We hope that eligible for ITC Credit.

thanks

v.swaminathan

[Rajagopalan Ranganathan]

Sir,

The answer is an emphatic 'yes'

[Spudarjunan S]

Dear Sir,

I agree with the view of Shri. Rajagopalan ji,

Supplementing to his view, you may also consider the exposure which the revenue may come with up as follows -

In terms of section 2(62) of the CGST Act - the term "input tax" includes the tax payable under the provisions of sub-section (3) of 9 of the CGST and respective State GST.

The revenue may take a stand the transaction in our discussion is covered in Schedule III hence the levy itself not being triggered, hence the tax has been paid wrongly without any authority (Article 265). Such amount has to be claimed as refund and not as ITC since it is not even a tax, which can raise to litigation.

[KASTURI SETHI]

As mentioned in the title of the query, it is not Court Fee. Actually, it is Liquidator Fee. The Court is the only collector of this amount for further payment to the Liquidator. Hence RCM is applicable and ITC is admissible if otherwise eligible.

[Prasanna Kumar]

According to Sl. No. 2 of Schedule III of CGST Act, 2017 "Services by any court or Tribunal established under any law for the time being in force SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES as already stated by the panelist in the first reply.

In the instant case, the Liquidator Fee( presumably) is ultimately paid to Liquidator. Though the court is collecting and paying to Liquidator, the services of the court are exempt as explained above. The person who is paying need not discharge the tax liability since the amount is an income Liquidator. Liquidator should discharge this liability because it is his income for the services rendered.

In the Advance Ruling in M/S. MANSI OILS AND GRAINS PVT. LTD. [2020 (7) TMI 141 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, it is said the Liquidator has to obtain the registration under the provisions of the CGST Act to dispose of the properties or assets of the insolvent company or Corporate Debtor. Since the liquidator fees is forming part of consideration for his services rendered, need to be taxed in his hand. In most of the cases the Liquidator fee will be just deducted from the proceeds of the assets of the liquidation.l

Liquidator cannot claim any ITC on this amount since it is his output liability/ tax.

The substance of the transactions is that the payment to court will ultimately be paid to Liquidator as his fees. Neither the payer nor the court has any role in the supply of services by the Liquidator. Here one thing is not clear that whether the company which is being liquidated is paying the money or somebody else. That information is also relevant in concluding the issue.

This is my view and panelist can differ based on their own view points.

Regards,

Prasanna Kumar

[KASTURI SETHI]

We can not depend upon the decision of AAR. It requires further penetration into the issue.

[Prasanna Kumar]

Dear Kasturi Sethi Ji

I agree with you that we need not go by AAR unless it is binding on us( we being applicant). But the Liquidator Fee is an income in the hands of Liquidator. He has to discharge applicable GST on his income. In his personal/ individual capacity also he has to discharge GST on that fee. Then the question is who has to pay GST. As I mentioned in my reply, normally the Liquidator fee will be paid out of the sale proceeds of the estate ( assets of the insolvent company). As we are all aware, the services of Courts are non taxable services. In this situation, who will be payer of the fees to Court? Is it the company, which is under the controller of Liquidator himself, or some other person?

The querist needs to explain these facts.

Regards,

Prasanna Kumar

AI Summary

Reverse charge liability applies where court-collected payments constitute liquidator fees, obliging payer or recipient to discharge GST and may permit ITC.
Where a court merely collects amounts that are in substance fees payable to a liquidator, those amounts constitute consideration for the liquidator's services; the liquidator must treat such fees as taxable output and discharge GST, while the payer may be required to discharge GST under reverse charge if applicable and may claim input tax credit if otherwise eligible, though revenue may argue any tax paid should be reclaimed as refund if the transaction is characterized as court services excluded under Schedule III.