Do receiving services where liability is fixed under RCM, mandate registration even to whom who are not registered? Let’s see

Section 24(III) of CGST act,  regarding compulsory registration mandate registration of a person who are required to pay tax under reverse charge and this also overrule section 22(I) of the act. It means registration require irrespective of the aggregate turnover limit.

It is interesting to read section 23 (I) (a) of the act which states that person not LIABLE TO REGISTER IF

“Any person engaged exclusively in the business of supplying goods or service or both that are not liable to tax or wholly exempt from tax under the act or under the IGST”

Combined reading of Section 23(I)(a) and Section 24(III) create some confusion that whether person receiving goods or service where RCM is applicable require to take mandatory registration, irrespective of the turnover as stated in section 22 (I) of the Act.

Section 23 is an independent section and in nowhere in Section 24 written that it overruled section 23 as it do so with section22 (I) of the act.

Answer would be yes as well as No. Let’s see few scenario of the fact:-

  • Service provided by educational institution to its students, faculty and staff which are exempt from GST under notification no 12/2017. Now if they receive service from lawyer do they need to register, as it is covered under RCM.
  • Let’s take the above mentioned example that apart from exempted services it also provide some taxable services like coaching but it’s turnover does not exceed exemption limit, so not registered. Now if they take same lawyer service where liability is under RCM as per Notification no 13/2017, do they need to take registration and pay GST under RCM.

Answer to above point 1) is NO & point 2) is yes.

So as per section 23 (i)(a) of the act, if a person engaged EXCLUSIVELY in the business of supply not liable to tax or wholly exempt from tax by virtue of some exemption notification than no need to take registration even if it receive service where tax need to paid under RCM. It is an independent section and read exclusively.

In other case if a person who engage in a business of goods or services which is partially or fully liable to tax but have not taken registered due to exemption limit. Need to take registration and pay tax under RCM if he receives service or good which is liable to RCM.

(Writer is a Member of ICAI and can be reached @[email protected] or +918178480333)

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8 Comments

  1. Raj Vagjiyani says:

    As you have discuss above

    I want add some point
    in exemption notification for advocate service taken it clearly says that upto 20lakh turnover of business entity
    Exempt and exeeding 20lakh taxable under rcm
    So we have turnover below 20lakh no need to pay rcm based tax because of exemption notifications
    And exeeding 20lh turnover person become liable for registration as well as need to pay tax for above service under RCM based
    That’s my personal view can differ

  2. gayatri enterprises says:

    I am a regular registered dealer. doing sales and purchases. I have received services (Transport) under RCM (by registered dealer-Transporter) every month. My firm’s aggregate turnover is rs.1.5 crores above. Now this year may I make entries and RCM and pay charges

  3. rajiv mangrulkar says:

    GST LAW ON WORK CONTRACT SERVICES IS INEFFECTIVE SINCE THE SITE WORKS ARE MOSTLY IN REMOTE AREAS AND RECORD KEEPING TO COMPLY WITH GST NOTIFICATIONS AND VARIOUS DATES NOT PRACTICABLE.

    ALSO HSD EXEMPT IN VAT, EARTH WORK/SOIL/NATURAL MATERIALS SINCE ROYALTY TAX IS ALREADY APPLICABLE, LABOUR CHARGES , ROADWORK EXPENSES, LOADING EXPENSES ETC WERE NOT UNDER SERVICE TAX FOR PUBLIC UTILITY ROAD, CANAL,DAM PROJECTS ETC.

    GST RATE CANNOT BE RATIONALIZED ON OVERALL PERCENTAGE BASIS BUT SHOULD HAVE BEEN ANALYSED FOR COMPONENTS OF THE NATURE OF EXPENSES UNDER WORK CONTRACT TAX.

  4. Manish mishra says:

    Advance ruling on this subject has been given by ARA
    RULING
    The Applicant is not required to be registered under the GST Act if he is not otherwise liable to
    pay tax under reverse charge under section 9(3) of the GST Act.
    This ruling is valid subject to the provisions under Section 103(2) until and unless declared void

  5. rajiv mangrulkar says:

    ONCE RCM IS ABOLISHED, EACH OF THE SUPPLIERS OF GOODS OR SERVICES NEEDS TO GET REGISTERED UNDER GST AND RAISE A GST INVOICE AND RCM CANNOT BE APPLICABLE ON RECEIVER OF GOODS/SERVICES. LAW CANNOT BE APPLIED IN PIECE MEALS BY NATURE OF SERVICE PROVIDERS. ALL THE SUPPLY OF SERVICES/GOODS IF ANY ARE NOT TAXABLE AND GST LAW CANNOT BE APPLIED IN PARTS MAKING RCM APPLICABLE ON SERVICES OF LAWYERS AND TRANSPORTERS/GTA ON RECEIVER OF SERVICE.

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