Often GST registered tax payer who are making supply of exempted goods and/or services comes up with the doubt whether they are liable to pay tax on goods and/or services procured which are covered under Reverse Charge Mechanism (RCM), let’s get that clear today.
When applicant registered under GST is making supply of exempted goods and/or services utilizes services which are liable to GST under Reverse Charge Mechanism (RCM), whether assesse is liable to pay GST under RCM for services procured?
As per the provisions of section 9(3) of CGST / SGST (UTGST) Act, 2017 / section 5(3) of IGST Act, 2017, Reverse Charge Mechanism,
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.
The above mentioned provision clearly specifies that the recipient of goods and/or service, irrespective of making outward supply of taxable or exempted goods and/or services, shall be liable to pay GST under RCM in respect of goods and/or services procured which are notified in Notification No. 4/2017 – Central Tax (Rate) and Notification No. 13/2017 – Central Tax (Rate).
The same has been clarified in the ruling passed by the Authority of Advance Ruling in Karnataka (Advance Ruling No. KAR ADRG 37/2022, date 27.10.2022). The applicant registered under GST is doing business of manufacture and supply of animal feeds, which are exempted goods under GST, for which they utilize the GTA / Security Services that are covered under RCM. They sought advance ruling regarding whether they are liable to pay GST under RCM for the service procured being manufacturer and supplier of exempted goods.
The Authority, subject to provision of section 9(3) of the CGST Act, 2017, passes the ruling that the applicant is liable to pay GST under RCM, for the services notified and covered under RCM, received from the service providers, in spite of being a manufacturer and supplier of exempted goods.
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