Reverse charge on services

[Bharat Cholleti]

Dealer exclusively deals in above 25kg prepackaged and labeled goods Viz., Rice on which GST is exempted by a circular by CBIC , such dealers receive some services like GTA,residential dwelling to a regd person, advocate fee does they liable to pay Reverse charge though the main commodity is exempt? general rule when dealing in exempt supplies RCM will not be applicable, please clarify sir.

[Ganeshan Kalyani]

Sec. 24 Compulsory registration at clause (iii) states as "persons who are required to pay tax under reverse charge;". As per this clause registration is required even if the outward supply is exempt, in my view.

[Amit Agrawal]

I agree with Shri Ganeshan Kalyani Ji. And to add, please note the followings:

A. Exemption from GST against GTA services for 'rice' can be claimed under Serial no. 21 (d) of Notification No. 12/2017- Central Tax (Rate) as amended till date. In other words, you need not take registration solely due to receipt of GTA services by way of transport in a goods carriage of rice.

B. Liability to pay GST under RCM against 'Service by way of renting of residential dwelling' is ONLY IF you are already registered or are required to be required for some other reason. In other words, solely due to receipt of this services, you need not take registration.

C. Against receipt of legal services from advocates, you - as a business entity located in the taxable territory - need to compulsorily take registration u/s 24 (iii) read with Section 25 and pay taxes under RCM there-against.

C1. Once you are required to get registered under circumstances explained in Para C above (or due to any other reason under law), you will automatically also be liable to pay taxes under RCM against services explained in Para B above (because you will be already registered person (or ought to be compulsorily registered person) while receiving those services).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Reverse charge: registration required where legal services are received, triggering RCM obligations and affecting other service RCM. Compulsory registration applies to persons required to pay tax under the reverse charge mechanism; receipt of legal services from advocates by a business entity in the taxable territory necessitates registration and payment of tax under RCM. Exemption for carriage of rice under the rate notification means GTA services for rice do not by themselves trigger registration or RCM. Renting of residential dwelling attracts RCM only if the recipient is already registered or otherwise required to register.