RCM on Rent for Exempted Commodity

[Praveen VR]

We seek your advice on the following query.

We have Clients who are selling only Exempted commodities and, hence do not come under the GST payment gambit. With the RCM on Rent rule being incorporated, should we still pay this (RCM on rent) without any chance of adjusting against outward tax liability payment. If we pay this RCM payment, is there any chance of recovery or do we have an exemption to pay RCM on rent for this category of GST dealers

[Sadanand Bulbule]

Dear querst

Plz refer:

Persons not liable for registration

23. (1) The following persons shall not be liable to registration, namely:––

(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;

(b) an agriculturist, to the extent of supply of produce out of cultivation of land.

(2) Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24, the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act.

My take:

The liability to pay tax on rent under RCM is on the recipient of such services who is a registered dealer.The legal position being so, taking registration is an option for such dealers. However as long as dealers falling under Section 23 [a] remain registered, they have to pay rent under RCM. If you want to escape from RCM liability under Section 9[3,] surrender your GSTIN.

[Sadanand Bulbule]

Read it as " querist"

[Sadanand Bulbule]

Corrigendum: 

Further, if any person who deals exclusively in exempted goods or services but receives goods or services for which RCM is applicable that recipient will have to take registration compulsorily.

For example If a petro pump dealer deals in only exempted or non-taxable goods but he receives GTA service under RCM. Registration for that recipient is mandatory under Section 24 (iii). 

So you need to remain as a registered dealer and pay tax on rent under RCM in terms of Section 9(3). 

[KASTURI SETHI]

I concur  with the reply (serial no.3) of Sh.Sadanand Bulbule, Sir.

[Shilpi Jain]

Since u have only exempted supplies, you can opt not to register under GST.  Once not registered you would not be liable under RCM.

AI Summary

Reverse charge on rent applies to registered recipients; registration status determines RCM liability and obligations. Liability for tax on rent under the Reverse Charge Mechanism falls on the recipient when that recipient is registered; registered dealers who deal exclusively in exempt supplies must pay RCM on rent where applicable, and surrendering registration removes that RCM obligation. Recipients who receive services subject to RCM must obtain compulsory registration and discharge RCM even if their outward supplies are exempt, whereas persons not registered because they only make exempt or non-taxable supplies are not liable under RCM.