1. The charging section (Section 9 of CGST Act, 2017, Levy and collection of GST) is the most important section in any law for levy (impose) and collection (payment) of taxes. The very basic for the charge of tax in any taxing statute is taxable event. i. e. the point of time when tax will be imposed.
The tax becomes payable when liability to pay tax arises and liability to pay tax arises by the happening of the taxable event. The taxable event under GST Act is supply of goods or services or both.
2. This article covers provisions of charging section 9(1) to 9(5) of CGST Act 2017. There are two types of Charges under GST.
2.1 Forward Charge: Forward charge or direct charge is the mechanism where the supplier of goods or services is liable to pay tax. Section 9(1) of CGST Act 2017 deals with Forward Charge.
2.2 Reverse Charge: Reverse charge is the mechanism where tax is payable by the person who is recipient of the goods and/or services. Section 9(3) and 9(4) deals with Reverse Charge.
2.3 In addition, there is a charging section 9(5) of CGST Act 2017, where Government specified the categories of services on which tax shall be paid by the E Commerce Operators.
3. Section 9(1) of CGST Act
|Statutory Provision Subject to section 9(2) of CGST Act (which states that GST on petroleum products will be levied at a later stage), there shall be levied a tax called the Central Goods and Services Tax (CGST) on all intra-State supplies of goods or services or both, except on supply of alcoholic liquor for human consumption, on the value determined under section 15 of CGST Act and at such rates not exceeding 20% as may be notified by Central Government, on the recommendation of GST Council and collected in such manner as may be prescribed Section 5(1) and 5(2) of IGST Act have parallel provisions in respect of IGST|
3.1 Relevant points of Charging Section 9 (1) under CGST Act 2017 are as follows :-
(a) CGST and SGST/ UTGST shall be levied on all intra state supplies.
(b) Tax shall be levied on Goods and /or Services (except on supply of alcoholic liquor for human consumption)
(c) Section 15 of the Act determines the value on which tax shall be charged.
(d) Rate of GST will be notified by Central Government on recommendation of GST Council. (Maximum rate of CGST is 20% )
3.2. The Central Government on recommendation of GST Council has issued following Notifications for GST Rates on Goods and Services :-
(a) Notification No. 1/2017-Central Tax (Rate) dated 28. 06. 2017 for CGST Rates on goods.
(b) Notification No. 11/2017-Central Tax (Rate) dated. 28. 06. 2017 for CGST Rates on services.
4. Section 9(2) of CGST Act – GST on Petroleum products at later stage : The GST on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the GST Council. These five petroleum products falls under category – non leviable.
5. Reverse Charge Mechanism : Normally, GST is payable by ‘taxable person’ who is supplying goods and services. Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST Act. Sections 22 and 24 of CGST Act requires every supplier of goods or/and services to register under CGST Act 2017.
However, in some cases, GST is payable by person who is recipient of the goods or services or both. This is termed as ‘reverse charge’.
|Statutory definition of Reverse Charge – Section 2(98) of CGST Act : Reverse charge” means the liability to pay tax by the person receiving goods or services or both instead of the supplier of such goods and/or services under section 9(3) or 9(4) of CGST Act or section 5(3) or 5(4) of IGST Act|
6. Section 9(3) of CGST Act – RCM on specified Category of Goods & Services : Section 9(3) of CGST and SGST Act and section 5(3) of IGST Act state that Government can specify categories of supply of goods or services or both, the tax on which is payable on reverse charge basis. The tax thereon shall be paid by the recipient of such goods or services or both. All the provisions of this Act shall apply to such person as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
A complete list of goods and services under RCM is available in the article – Reverse Charge Mechanism (RCM) List under GST.
7. Section 9(4) of CGST Act – Supply received from Unregistered person : In case of receipt of supply of goods or services or both from unregistered supplier, IGST/CGST will be payable by the recipient, in respect of specified categories of goods or services as may be notified by Government on recommendation of GST Council,
7.1 The words ‘in respect of specified categories of goods or services’ inserted vide IGST (Amendment) Act, 2018 and CGST (Amendment) Act, 2018. w. e. f. 1-2-2019. Prior to this Amendment, such reverse charge was applicable to all the supplies received from unregistered person, though this provision was kept in abeyance for the period 13-10-2017 to 30-9-2019
7.2 The Government vide Notification No. 07/2019 Central Tax (Rate) dated 29th March 2019 notified that Section 9(4) will be applicable for “Promoters” only for following supplies :-
The promoters are required to purchase at least 80% of input & input services from registered person. They are required to pay tax under Reverse Charge Mechanism ( RCM ) in respect of shortfall from the minimum value (80% of the value of input & input services goods and / or services ) required to be purchased for construction of project.
For Example : Total purchases of input & input services for a project is Rs 100 and the promoter purchased cement from unregistered person for Rs 30. His other purchases of input & input services from registered supplier is Rs 40. He is required to pay tax under RCM in respect of shortfall of Rs 10 [ 80-(40+30)]. Detailed explanation of promoter’s liability under RCM is brought out in the article – Promoter’s Liability under Reverse Charge Mechanism (RCM)
7.3 Further, the Government vide Notification No. 24/2019-Central Tax (Rate) dated 30th September, 2019 specified that any value of cement purchased from an unregistered person by a promoter would be liable in his hands under RCM. Promoter shall pay tax under RCM at the applicable GST Rate. At present GST Rate of Tax for cement is 28%. This tax will be paid under RCM in the same month of purchase.
7.4 Promoter is also liable to pay GST under reverse charge on Capital goods received from unregistered person for construction of a project
8. Sec 9(5) of CGST Act – Liability of E Commerce Operator to pay Tax : Section 9(5) of CGST Act 2017 is a charging section under GST for supply of notified services.
As per section 9(5) of CGST Act, the Government may specify categories of services, the tax on which shall be paid by the electronic commerce operator, if such services are supplies through it and all the provisions of this Act shall apply to such electronic as if he is the supplier liable for paying the tax in relation to the supply of such services.
Where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Further, where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
The Government vide notification No. 17/2017-CT (Tax) dated 28-6-2017 specified following categories of services on which e commerce operator is liable to pay tax :-
8.1 Service of transportation of passengers – Service by way of transportation of passengers by radio-taxi, motorcar, maxi cab and motor cycle. Examples are Uber, Ola etc. The entire tax is payable by e-commerce operator.
Radio taxi means a taxi (including a radio cab), by whatever name called, which is in two-way radio communication with a control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS).
8.2 Service of providing accommodation in hotels, inn, campsites – Service by way of providing accommodation in hotels, inn, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. However, if the person supplying such service is registered under CGST and SGST Act, the e-commerce operator will not be liable to pay GST
8.3 Home stay service or guest house service provided through e-commerce operator – If Home stay or guest house service provided through e-commerce operator, the supplier of service will not be liable to pay tax if his turnover is less that Rs 20 lakhs. In that case, the supplier is not required to register and liability to pay tax will be on e-commerce operator ( CBI&C circular No. 27-1-2018 dated 4-1-2018. )
8.4 House-keeping like plumbing, carpentering etc. – Services by way of house-keeping, such as plumbing, carpentering etc. , except where the aggregate turnover of the person supplying such service through electronic commerce operator is less than Rs 20 Lakhs, he is not liable to get registered under GST. In that case, the e-commerce operator will be liable to pay
9. General Provisions applicable for charging under Reverse Charge Mechanism (RCM)
9.1 Payment Voucher :- When payment is made by recipient in respect of supplies where tax is payable under reverse charge, payment voucher is required to be issued – Section 31(3)(g) of CGST Act.
9.2 Self invoicing :- The recipient of goods or/and services, who is liable to pay GST under reverse charge is required to prepare tax invoice in his own name. He can prepare a single consolidated monthly invoice (second proviso to Rule 46 of CGST and SGST Rules, 2017. )
9.3 Tax to be paid through Electronic Cash Register only : The GST under reverse charge should be paid through Electronic Cash Ledger only it cannot be paid by utilizing Electronic Credit Ledger –( section 49(4) of CGST Act read with section 2(82) of CGST Act. )
9.4 ITC can be availed only after making payment : A person can avail the ITC on such services (on which he is liable to pay GST under reverse charge) only after making payment of that tax in his electronic cash ledger – Rule 36(b) of CGST and SGST Rules, 2017
9.4.1 There are different views on this issue. Payment of tax under reverse charge and taking its credit is a simultaneous process. The availment of taking ITC in the same month can be justified on this ground
9.5 Furnishing details of inward supplies – Every person liable to pay service tax under reverse charge is required to furnish details of inward supplies – Section 38(2) of CGST Act.
9.6 Aggregate turnover – ‘Aggregate turnover’ does not include value of supplies in which tax is levied under reverse charge – section 2(6) of CGST Act.
9.7 Output tax – “Output tax” excludes tax payable by him on reverse charge basis – section 2(82) of CGST Act and section 2(18) of IGST Act.
9.8 Liability to be registered – Persons who are required to pay tax under reverse charge are required to be registered, irrespective of the threshold limit specified ( section 24(iii) of CGST Act. ) However, Persons who are exempt from registration under section 23 of CGST Act (exclusively engaged in supply of goods or/and services) are not required to register and pay GST under RCM (Notification No. 5/2017-CT dated 19-6-2017)
9.9 Supplier’s liability to Registered : Persons who are making supplies of taxable goods or services or both, where total tax is payable by recipient of goods or services are exempt from registration under GST Act – Notification No. 5/2017-CT dated 19-6-2017
10. RCM on Inter State Transactions : In case, service provider (Advocate, Director, Author is from out of India), it will be ‘import of service’ and IGST will be payable under Reverse Charge Mechanism(RCM). The confusion arises, where supplier of service is from different state in India. Technically, IGST is to be charged as in case of reverse charge, the service recipient is only discharging the liability of supplier of service. If the supplier of service was liable to pay tax, obviously he would have paid IGST as both the supplier and recipient are in different states.
There is divergent view on this issue. According to another school of thought, when service recipient is paying tax under reverse charge, he enters into shoes of the supplier of service. He becomes ‘deemed supplier’. If so, the location of service recipient (who is deemed as service supplier under reverse charge) and place of supply is in same State and hence CGST and SGST should apply.
Further, the recipient have to prepare self tax invoice. He will indicate his own State as place of supply. GSTN system may not accept the invoice indicating interstate supply while uploading the details of tax paid under reverse charge in table 4B of GSTR-1 return. To be safer side, it is advisable to pay CGST and SGST base on self invoice, arguing that since self invoice is prepared, the recipient of service is ‘deemed supplier’ and hence liable to pay CGST and SGST.
11. Used vehicles, seized and confiscated goods, old and used goods, waste and scrap supplied by Government – In case of used vehicles, seized and confiscated goods, old and used goods, waste and scrap supplied by Central Government, State Government, Union territory or a local authority, the registered person receiving the supply is liable to pay tax under reverse charge Notification No. 4/2017-CT (Rate) and 4/2017-IT (Rate)both dated 28-6-2017 amended w. e. f. 13-10-2017.
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Part 5 of the series will cover the topic “ Composition Scheme – Section 10 of the CGST Act.
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