In the current article we will discuss about services On Which Goods and Service Tax (GST) Is Payable Under reverse charge Mechanism (RCM) in different scenarios.
As per notifications given by government as on date there are various notified services on which GST has to be paid on reverse charge basis.
We must first understand Supply of GTA services, GTA has two options first is to “5% GST NO ITC” and second “12% GST WITH ITC”. GTA can charge 5% GST from the customers but he is not eligible to claim input tax credit for the input, input service and capital goods, however he has other option to charge 12% GST and claim input tax credit of input, input service and capital goods. There are certain items on which 0% rate of GST is levied so that essential items are not gets inflated so it can be said that for the essential or necessity items are at 0% rate of GST. Now it should be further subdivided under 2 categories:-
As per the notification if legal services are provided by :-
Directly or indirectly to any business entity located in taxable territory then GST under reverse charge has to be paid by the business entity. Legal services means any services provided in relation to advice, consultancy or assistance in any branch of law in any manner and includes representation services before any court, tribunal or authority. However if legal services are being provided by advocates to other than business entity are covered are covered under the exemptions given by the government. Hence if services are provided to business entity then the business entity is liable to pay tax and in other than business entity exemption is given by the government,
As per the notification in respect of services provided or agreed to be provided by “Arbitral tribunal” to any business entity in taxable territory then the GST on supply of service by arbitral tribunal would be paid on reverse charge basis by the business entity.
Arbitral tribunal is a private tribunal constituted by the parties mutually through an agreement for disposal of any kind of future disputes between the parties.
As per the above notification sponsorship service being provided by any person to any:-
Located in taxable territory then tax has to be paid by the body corporate or the partnership firm under reverse charge. So it can be said that if sponsorship service is given to any individual then there would not be any reverse charge the supply of service would attract normal charge.
It should be further divided under three heads for better understanding:-
If a director of a company makes supply of services to the company or body corporate then GST is liable to be paid on reverse charge basis by the company or body corporate but in case of whole time director no GST is applicable as it is in the course of employment which is out of the scope of GST as per Para-I of Schedule-III.
All the services provided by the Insurance agent to any person carrying insurance business then person liable to pay GST is that person who is carrying any insurance business located in taxable territory under reverse charge E.g. GIC and LIC.
All the services provided by the Recovery agent to:-
Then the person liable to pay tax is banking company or financial institution or NBFC located in taxable territory.
Supply of service by way of transfer or permitting use or enjoyment of a copyright covered under sec 13(1)(a) of copyright Act, 1957 relating to “Original literary”, “Dramatic”, “Musical” or Artistic works by
To a publisher, music company, producer or the like located in taxable territory then person liable to pay tax under reverse charge would be a Publisher, music company or producer located in taxable territory.
This should be divided into 2 parts:-
“non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.
Explanation.––For the purposes of this clause, the expression “governmental
authority” means an authority or a board or any other body,––
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;
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