Applicability of Reverse charges on Government RTA taxes

[Ravikumar Doddi]

Dear sir,

is there any reverse charge applicability on quarterly RTA tax on commercial vehicles used by the business entity for transportation of goods which fee was collected by the State Government. Department is asking to pay RCM on these. please clarify. I could not found exemption in NNo.12/2017(CTR) nor NNo.13/2017(CTR).

[KASTURI SETHI]

Is it fee or tax ?

[KASTURI SETHI]

It appears that it is a tax and not fee. It should be covered under Section 7 (2)(b) of the CGST Act.

[Ravikumar Doddi]

Sir,

It is a tax not fee

[KASTURI SETHI]

Difference between 'tax' and 'fee'. A tax is not a fee and vice versa.

'Fee' is charged for service rendered and 'tax' is not charged for service rendered. Tax is a levy by statute.----Supreme Court.

This is a difference between the two. Go through the judgment of the Supreme Court

For example : RCM is applicable for fee paid to DGFT for issuance of Advance Authorization License. In your case it is a tax and not fee.

If no element of service/supply is involved, how RCM is applicable. First the activity must qualify the definition of 'supply' of service.

2021 (10) TMI 1071 - SUPREME COURT - JALKAL VIBHAG NAGAR NIGAM & ORS. VERSUS PRADESHIYA INDUSTRIAL AND INVESTMENT CORPORATION & ANR.

[Ravikumar Doddi]

Thank you so much sir

[Padmanathan KV]

I agree with the views of Ld. Kasturi Ji. Any "tax" which is levied by State Government will not qualify as supply for the exigibility of GST.

[Alkesh Jani]

Dear Experts,

From the given facts, I assume that department has raised the issue on the basis of Section 15 (2)(a) of CGST Act, 2017 and same is reproduced below:-

"(2) The value of supply shall include–––

(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;..."

Experts are requested to forward their views with regard to applicability of above provision.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

The question of valuation arises only if ;

(i) any activity or transaction conforms to the parameters laid down in the scope of supply under Section 7(1) of CGST Act.

(ii) an activity or transaction should not fall in the exclusion clause under Section 7(2)(b) of CGST Act which excludes the activities or transactions undertaken by Central Govt., a State Govt. or any local authority as public authorities,------------.

The issue of inclusion of tax, fee etc. under Section 15(2) will arise only after crossing first two stages.

In my reply above, I have highlighted the difference between 'tax' and 'fee' based on the judgement of Supreme Court.

[Alkesh Jani]

Shri KasturijiSir,

Can we put it in this way…

That as during the purchase of goods taxes paid were including all the taxes and fees as applicable.

Payment of tax on recurring basis, is not applicable as the same does not qualify as “supply” and GST is leviable only on supply of goods or services.

Further, no revised or supplementary invoices are issued by the supplier and state taxes are to be paid without any supply, hence not taxable.

As there is not exemption available, but at the same time taxable event is also not present in the said transaction.

Your views please.

Thanks

With Regards.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Yes. I agree with you. Your reply throws more light on the issue.

[Shilpi Jain]

Agree. Mere collection of tax without any underlying transaction, no liability of GST. Section 15 valuation will also not attract.

AI Summary

Reverse Charge Mechanism Inapplicable to RTA Taxes on Commercial Vehicles Under GST; No Supply of Service Involved. A discussion on the applicability of reverse charge mechanism (RCM) under the Goods and Services Tax (GST) for government-collected RTA taxes on commercial vehicles used for business transportation. The query raised concerns about whether this tax qualifies as a fee or a tax, with participants clarifying that it is a tax. It was concluded that RCM is not applicable since the tax does not constitute a supply of service. Additionally, the discussion highlighted that mere tax collection without an underlying supply does not attract GST liability, referencing relevant sections of the CGST Act and a Supreme Court judgment.