Reverse Charge Mechanism

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

I am providing legal services to a society where they provide only a trust-based activity. Now as per sec 9(3) of CGST/SGST Act, the receiver who receive the legal services should discharge the tax liability to the government exchequer. In this case, the society does not have any taxable sales / services for consideration and they don't have the GST registration also.

My query is how the gst will be discharged by the client. Please explain to me with a suitable notification with an explanation.

Thanks in Advance.

[ARVIND JAIN]

As per Sec-24. Compulsory registration in certain cases- (iii) persons who are required to pay tax under reverse charge;

So Simple take registration in the case of the Trust and Pay as it comes under the compulsory registration category.

[KASTURI SETHI]

Legal services provided to a business entity are covered under RCM. Here the question arises whether the society in question is charitable trust or not ? Throw more light on the constitution of society.

[THYAGARAJAN KALYANASUNDARAM]

Dear sir,

The society undertook the only charitable activity and registered one.

Thanks in advance.

[KASTURI SETHI]

If service receiver (Trust) is not a business entity, RCM is not applicable. FCM is applicable and Service Provider will avail threshold exemption. Also see Serial No.45 of Notification No.12/2017 CT (R) dated 28.6.17 as amended.

[JACOB KORA]

Please confirm whether RCM is applicable on service received from an advocate to a society/Trust which is registered under GST.

[KASTURI SETHI]

It is not necessary that registered person is a business entity. There are so many factors for a person who gets registered with the GST department. In the subject query, service receiver is non-business entity. Hence RCM not applicable.

There are different definitions of 'charitable' in the Income Tax Act and CGST Act.

AI Summary

Reverse charge: recipient must register and pay GST on received legal services if liable; otherwise supplier remains liable.
Reverse charge applies to legal services received by a society only if the recipient is a business entity obliged to pay tax under the reverse charge mechanism; such a recipient must obtain compulsory GST registration and discharge tax. If the society/trust is a non business entity, reverse charge is not attracted and the service provider is liable under the forward charge, subject to threshold exemption. Determination depends on the society's constitution, activities, and the statutory lists of services covered by reverse charge.