Interpretation of Reverse Charge Mechanism in Raw Cotton Purchases: The Role of Kacha Arhtia

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.... the Reverse Charge Mechanism (RCM) under the CGST/PGST Act 2017, specifically regarding the purchase of raw cotton from Kacha Arhtia. Key aspects of the judgment include: * Scope of Supply and Role of the Agent: The AAR emphasized that under the GST Act, the supply includes activities specified in Schedule-I or those undertaken through an agent. The critical factor for establishing an agent&#....

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....ts (General) Rules 1962: The sale of agricultural produce, including raw cotton, in the market is governed by these rules. The rules mandate that all agricultural produce brought to the market be sold by open auction in the principal or sub-market yard, with the price settled at the auction and not by secret bids or signs​​. * Role and Responsibilities of Kacha Arhtia: The Kacha Ar....

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....passing the remainder to the seller​​. * Determination of GST Liability under RCM: Given these considerations, the AAR concluded that in the case at hand, the liability to pay GST under the reverse charge mechanism falls on the buyer (Applicant) and not the Kacha Arhtia. This conclusion is based on the role and functions of the Kacha Arhtia as an intermediary rather than a principa....