Section 9(3) of CGST Act, 2017 provides that “The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”

In view of the above provision, the government had published Notification No 13/2017-Central Tax (Rate) dated 28.06.2017 enumerating the list of services on which the recipient of services are required to pay tax under reverse charge mechanism.

The services that are listed in the said notification are discussed below:

Goods Transport Agency: A registered factory, a registered society, an established co-operative society, a person registered under GST, an established body corporate, a partnership firm including association of person, a casual taxable person located in taxable territory receiving service from a goods transport agency (GTA) who has not paid central tax at the rate of 6% shall pay tax under reverse charge mechanism.

Exception: A Department or Establishment of the Central Government or State Government or Union Territory or Local authority or Government agencies receiving service from a GTA and who has taken registration under GST only for the purpose of deducting tax u/s 51 and not for making a taxable supply of goods or services need not pay tax under reverse charge mechanism.

Legal consultancy service: A business entity located in the taxable territory receiving service from an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly shall pay tax under reverse charge basis.

“Legal Service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

Services supplied by an arbitral tribunal:  A business entity located in the taxable territory receiving service from an arbitral tribunal shall pay tax under reverse charge basis.

Services provided by way of sponsorship: A body corporate or partnership firm located in the taxable territory shall pay tax under reverse charge basis on receiving sponsorship service from any person.

Service supplied by the Central Government, State Government, Union Territory or local authority: A business entity located in the taxable territory receiving service from Central Government, State Government, Union Territory or local authority except renting of immovable property, and specified services like services by the Department of Posts by way of speed post, express parcel, life insurance, agency services provided to a person other than Central Government, State Government or Union Territory or local authority, Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport, transport of goods or passengers shall pay tax under reverse charge basis.

Services supplied by the Central Government, State Government, Union Territory or local authority by way of renting of immovable property: A person registered under GST receiving service of renting of immovable property from Central Government, State Government, Union territory or local authority shall pay tax under reverse charge basis.

Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI): A promoter receiving service by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project from any person shall pay tax under reverse charge basis.

Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount:  A promoter receiving Long term lease of land (30 years or more) against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project from any person shall pay tax under reverse charge basis.

Services supplied by a director of a company or a body corporate to the said company or the body corporate: The company or a body corporate located in the taxable territory receiving service from a director of a company or a body corporate shall pay tax under reverse charge basis.

Services supplied by an insurance agent to any person carrying on insurance business: A person carrying on insurance business, located in the taxable territory receiving service from an  insurance agent shall pay tax under reverse charge basis.

Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company: A banking company or a financial institution or a non-banking financial company, located in the taxable territory receiving service from a recovery agent shall pay tax under reverse charge.

Supply of services by an author, music composer, photographer, artist: A publisher, music company, producer or the like, located in the taxable territory shall pay tax under reverse charge on receiving service from an author or music composer, photographer, artist, or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works.

Supply of services by the members of Overseeing Committee to Reserve Bank of India: Reserve Bank of India shall pay tax under reverse charge basis on receiving service from Members of Overseeing Committee constituted by the Reserve Bank of India.

Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs): A banking company or a non-banking financial company, located in the taxable territory receiving service from an individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm shall pay tax under reverse charge.

Services provided by business facilitator (BF) to a banking company: A banking company, located in the taxable territory receiving service from a Business facilitator (BF) shall pay tax under reverse charge basis.

Services provided by an agent of business correspondent (BC) to business correspondent (BC): A business correspondent, located in the taxable territory receiving service from an agent of business correspondent (BC) shall pay tax under reverse charge basis.

Security services (services provided by way of supply of security personnel) provided to a registered person: A registered person, located in the taxable territory receiving security service from any person other than a body corporate shall pay tax under reverse charge basis.

Exception: GST is not required to be paid on receipt of security service by a Department or Establishment of the Central Government or State Government or Union territory or by a local authority or by a Governmental agencies which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a  taxable supply of goods or services or by a registered person paying tax under section 10 of the said Act.

The person paying tax under reverse charge on the above mentioned services are eligible to take GST credit provided their outward supply is taxable under GST. Further, the person whose outward supply is covered under the aforesaid reverse charge notification need not registered under GST law.

(This is for academic purpose only. Kindly visit www.onlinetaxupdate.com. Send your feedback/query to email@onlinetaxupdate.com)

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