RCM on transportation due to wrong reporting by GTA

[SUSHIL BANSAL]

Dear experts,

My client sold goods to unregistered recepient.Freight paid by the recepient.But the transporter(GTA) while filing GSTR-1 ticked ' GST payable on RCM' & mentioned GST no.of our client.Now while doing GST audit the department is asking for RCM on this transaction.Plz guide how we are liable for such RCM & how to pleade for that.

[Amit Agrawal]

Kindly put on record that 'Your client was neither the who paid nor the one who was liable to pay subject freight for the transportation of goods by road in goods carriage' and hence, he was not service receiver of subject services under dispute.

And therefor, your client is not liable to pay GST under RCM in terms of Serial No. 1 of Notification No. 13/2017- Central Tax (Rate) read with Explanation (a) given therein.

Just because supplier of service has wrongly issued invoice in your client's name - showing RCM liability - cannot be legally valid reason to levy GST under RCM upon your client. Mistake made by the supplier cannot be reason to levy GST on a person who is not even the recipient of subject service. Furthermore, as filing of Form GSTR-2 & 3 were never made operational, your client was in no position to challenge the correctness of said invoice over GST portal.

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

[Padmanathan KV]

I broadly agree with views of Amit Ji. But, i am not able to understand how the transporter (GTA) has given the GSTIN of your client.

According to Sec 2(93) “recipient” of supply of goods or services or both, means–

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

Thus recipient is not the person who actually pays but the one who is liable to pay.

It appears to me that the actual arrangement/contracts etc between the GTA and your client has to be verified to determine who is the "recipient".

AI Summary

Reverse charge mechanism: misreported GTA invoice does not automatically make consignee liable for freight services. Whether a consignee is liable under the reverse charge mechanism depends on who was contractually and legally the recipient of the GTA's transport service; a supplier's erroneous invoice or portal entry naming the consignee and indicating RCM does not, by itself, create RCM liability where the consignee neither paid nor was contractually liable to pay freight. Verification of contractual arrangements and documentation that the consignee was not the service receiver are decisive, and procedural limitations on portal filings do not alter substantive recipient-based liability.