Reverse Charge and the Place of Supply

[Rakesh Garg]

Dear All,

Reverse Charge (RCM) and the Place of Supply (POS)

1. If we read carefully, we would observe that the POS provisions under the IGST Act are made in relation to the Supplier.

2. GST is destination-consumption based tax except in few circumstances, such as, immovable property, right to admission, etc. Thus, tax must reach the state where the Recipient is located.

3. In the case of RCM goods/services, the Recipient is deemed as a supplier to pay tax u/s 9(3).

4. In my view, RCM provisions in the IGST Act [Sec 5(3)] would be applicable in rare cases. To support, take a few illustrations: -

5. Suppose, Delhi BE (business entity) receives legal services from Delhi Advocate → Delhi BE will pay C+S [CGST+SGST].

Suppose, Delhi BE receives legal services from Mumbai Advocate → Delhi BE is deemed as supplier and is also a Recipient → Thus, supplier and recipient, both are in Delhi → Further, destination of supply and POS u/s 12(2) of the IGST Act is Delhi → Hence, in this case also Delhi BE should pay C+S even though Delhi BE and Mumbai Advocate are in different states.

6. Take another case: Suppose, Delhi registered BE receives renting services from Delhi Landlord (property at Delhi) → Delhi BE will pay C+S.

Suppose, Delhi BE receives renting services from Mumbai Landlord (property at Delhi) → then also Delhi BE should pay C+S because immovable property and the POS u/s 12(3) of the IGST Act is in Delhi → Hence, in this case also Delhi BE should pay C+S even though Delhi BE and Mumbai Landlord are in different states.

7. Take another case: Suppose, Delhi registered BE receives renting services from Mumbai Landlord (property is at Gurgaon, Haryana) → since the immovable property is located in Haryana, tax should reach in Haryana → POS is Haryana u/s 12(3) of the IGST Act as the property is in Haryana → In this case, Delhi BE should pay IGST (POS at Haryana) to achieve the basic intention of the GST.

Open for discussion

AI Summary

Place of supply determines whether reverse charge attracts IGST or central and state tax based on supplier or property location.
Reverse charge raises whether the recipient, though liable to pay GST, is to be treated as the supplier for determining place of supply and consequently whether IGST or CGST+SGST applies. The place-of-supply rules in the IGST Act are framed with reference to the supplier and to the location of immovable property where relevant; levy remains tied to the nature of supply (inter- or intra-State), while reverse-charge notifications shift the obligation to collect/pay to the recipient for limited purposes. Practical consequences include registration, input-credit issues, and correct tax head allocation.