As per schedule I supply of service without consideration to related/ distinct person will be treated as supply. Admitting a person into a premises for “consideration” alone can be treated as business under Sec 2(17)(f). It is not clear whether schedule I can override section 2(17)(f).
As per Section 9(4), the registered taxable person, who receives goods or service from unregistered person, the receiver, will have to discharge the tax liability. Strangely, the word service or good “received in the course or furtherance of business” is not used in this section.
This leads us to conclude that an individual paying tax on renting of immovable property has to pay tax under RCM on all goods and service received by him from unregistered even for personal use. Unfortunately no input tax is available on such tax. This not only puts a burden on inflow but the said individual has to prepare self invoice and also file return for the same. To avoid the hazels, he may have to deal with register persons only, but still has to upload such transaction in his monthly return without claiming input tax credit.
Let us take the case of a small trader (proprietor) or an individual having taxable rental income but whose turnover is below 20 lakhs
He need not get himself registered under GST. Assuming such person pays some legal fees to advocate, and then he has to get himself registered for purpose of paying GST under RCM even though his turnover is below threshold limit, his is as per section 9(5) of CGST Act. Once he becomes a “registered person” under GST, the provisions section 9(4) is also attracted, which means he has to pay tax under RCM ON ALL goods/ service received from a unregistered persons resulting in undue hardship in payment of tax under RCM (with no ITC) and also need to generate self invoice and upload the same in monthly return.
An individual may be residing in one state and having immovable property in another state. Controversy has already started whether he has to pay IGST or CGST in the state where property is located.
To conclude, it will be better if clarification is given by CBEC above points.
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018