Facts of the case:

Mr. Krsna is registered in GST in Delhi dealing in the supply of consultancy services. He takes one residential property on rent in Gurugram, Haryana. Mr. Krsna uses the property partially for residential and partially for official purposes. He provides consultancy sitting at his Gurugram residence also.

The following questions emerge out of the facts-:

1. Whether this transaction falls under the ambit of RCM under entry no. 5AA wef 18/07/2022 in Not. 13/2017 CTR?

2. Assuming this transaction comes under the ambit of entry no. 5AA, then what is the nature of this transaction under RCM, and which type of tax shall require to be deposited, i.e., IGST or CGST+SGST?

3. Whether combined reading of clause (iii) of sec.24 of CGST Act and entry no 5AA of Not. 13/2017 CTR, would Mr. Krsna be required to take compulsory registration at Gurugram, Haryana Also?

Replies to the above questions have been framed keeping in the light of updated CGST Act and other notifications issued into that.

Replies are in sequence:

1. Whether this transaction falls under the ambit of RCM under entry no. 5AA wef 18/07/2022 in Not. 13/2017 CTR?

Reply– Entry no 5AA has been inserted wef 18/07/2022 in Not. 13/2017 CTR, it states that Service by way of renting of residential dwelling to a registered person. If these services are provided by any person to any registered person under GST then tax is to be paid by that registered recipient under reverse charge.

Now, the question arises, the recipient has to be registered under GST, in this case study person is registered in Delhi and the property is located in Gurugram. Apparently, if we say the person should be registered under GST, means registered anywhere in the country under the law. Moreover, whenever a tax is to be paid under RCM then all the provisions applicable to the supplier are applied to the recipient. Therefore, if the registered person(recipient) comes into the shoes of the supplier.

But another question may arise as to that in which state the recipient is to be registered, whether in which property is located or in any other state. In order to give effect to this entry no. 5AA, we may consider that person should be registered in GST anywhere in the country.

Therefore, on the first look, this entry applies to the case at hand.

2. Assuming this transaction comes under the ambit of entry no. 5AA, then what is the nature of this transaction under RCM, and which type of tax shall require to be deposited, i.e., IGST or CGST+SGST?

Reply– In the light of the reply to question 1, it is decided that the case comes under the ambit of entry no. 5AA of Not. 13/2017 CTR. The next issue that arises is, what would be the nature of the transaction (whether inter-state or intra-state) based on which type of tax to be levied is to determined.

It is already informed to the readers that in the case of RCM, the recipient fits into the shoes of the supplier. And all the provisions of law shall apply as if he is the supplier only and not the recipient. Accordingly, place of supply (POS) provisions are also squarely applicable to the recipient. As per POS provisions, as the property is located in Gurugram, Haryana, this should be intra-state supply, and CGST and Haryana SGST should be paid. However, the service recipient is not registered in Haryana and it is not possible for Mr. Krsna (recipient) to pay tax under RCM as CGST+SGST(Haryana).

Now, under this specific case study, where the recipient is registered in one state and the property is located in some other state, though local GST is required to be paid but no specific attention is given to this type of situation. It is a well-established principle of every law that statute should provide the mechanism to pay taxes levied. (Govind Saran Ganga Saran, Supreme Court). If there is no system provided in the law to pay tax as in this case it appears, then the levy fails.

The author appeals to the GST Council to consider this situation and come out with some clarification or change in the law so as not to make the provision ineffective.

3. Whether combined reading of clause (iii) of sec.24 of CGST Act and entry no 5AA of Not. 13/2017 CTR, would Mr. Krsna be required to take compulsory registration at Gurugram, Haryana Also?

Reply– Sec 24-Compulsory registration in certain cases.

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,—

  (i) …….;

  (ii) …….;

  (iii) persons who are required to pay tax under reverse charge;

As per the discussion in forgoing paras, when we read both provisions together, this naturally comes to mind whether due Entry no. 5AA, compulsory registration is required. Like, in the case study Mr. Krsna is not registered in Haryana but he is required to pay taxes under RCM in Haryana. Therefore, is it mandatory for Mr. Krna to take registration at Haryana also?

This question is in its early stage of eruption. It is requested to the administration to come out with some clarification on this matter. Till mist is removed from the face of the context, let’s hope for the best and a better, simplified, and people-friendly tax mechanism for the betterment of this great nation.

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The author can be reached at [email protected], His Mobile no. is +91-9891112120.

DISCLAIMER: This publication is merely a general guide meant for knowledge purposes only. All the references or content are for educational purposes only and do not constitute legal advice. We do not accept any liabilities whatsoever for any losses caused directly or indirectly by the use/reliance of any information or conclusion contained in this publication. Prior to acting upon this publication, you’re suggested to seek advice. This work is entirely in the interest of the profession and to contribute to my beloved subject of GST.

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Qualification: CA in Practice
Company: Spark & Associates
Location: DELHI, Delhi, India
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