Is RCM is appliocable in retainership service

[Affirmservicesconsultancy Privatelimited]

A Pvt. company (GST Registered) keep his retired employee for professional service and make payment as Professional fees for Retainer booked.

Is the payment made to the retired employee fall under RCM or not.

Thanking for your co-operation

[Sadanand Bulbule]

Dear Sir

In terms of serial number 2 of Notification No.13/2017-Central Tax [Rate] dated 28/06/2017, the services supplied by following person/s is liable to RCM in the hands of any business entity located in the taxable territory:

"An individual advocate including a senior advocate or firm of advocates." [ Supplier of legal service]

In your case, the retired employee is providing only professional services [other than in the capacity of an advocate]

Explanation.- “legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

Hence professional services provided by retired employee do not fall under Sl. No. 2 above. So it is not liable for RCM.

[KASTURI SETHI]

Professional services fall under Heading 9983 (SAC) and legal services are classified under Heading 9982 (SAC). A world of difference between both terms. Hence no RCM is applicable.

No need to explain further as comprehensive and clear-cut reply has already been posted by an expert, Sh. Sadanand Bulbule Sir Ji.

[Shilpi Jain]

I am assuming that the employee is a person in India. 

When there is no entry in RCM notification that the above service by ex-employee can fall under then no liability on the recipient entity.

[Padmanathan KV]

I agree with experts. The impugned activity of retired employee does not seem to attract RCM. However, if the limit of 20 lakhs is exceeded, retired employee will have to take registration u/s 22 and charge GST on forward charge.

AI Summary

Reverse charge mechanism limited to legal services; professional services by retired employees do not attract RCM under the cited entry. The reverse charge entry applies to services supplied by individual advocates or firms of advocates and to 'legal service' as advice, consultancy, assistance or representational services; professional services provided by a retired employee that are not legal services therefore do not attract reverse charge, though the retired employee may require GST registration and must charge tax under forward charge if the statutory supply threshold is exceeded.