Badlani Classes

REVERSE CHARGE MECHANISM IN GST

Revised and up to date List of services covered under
RCM as on 01.04.2019

Meaning Normally, seller collects GST from Buyer and pays it to government. But, in
some cases, buyers pay GST directly to government. This is called RCM.
Types of RCM There are two type of reverse charge scenarios provided in GST law.
1- First category is dependent on the nature of supply and/or nature of
supplier. The first scenario is covered by section 9(3) of the CGST/
SGST (UTGST) Act and section 5 (3) of the IGST Act.

2- Second category is covered by section 9(4) of the CGST/SGST (UTGST)

Act and section 5 (4) of the IGST Act where taxable supplies by any
unregistered person to a registered person is covered by Notification
No. 07/2019- Central Tax (Rate)
Registration: A person who is required to pay tax under reverse charge has to compulsorily
register under GST and the threshold limit of Rs. 10/20/40 lacs is not
applicable to them.
ITC A supplier cannot take ITC of GST paid on goods or services used to make
supplies on which recipient is liable to pay tax.
Compliances in 1. Every tax invoice has to mention whether the tax in respect of supply in
respect of supplies the invoice is payable on reverse charge. Similarly, this also needs to be
under reverse mentioned in receipt voucher as well as refund voucher, if tax is payable
charge on reverse charge.
mechanism: 2. Maintenance of accounts by registered persons: Every registered person
is required to keep and maintain records of all supplies attracting
payment of tax on reverse charge.
3. Any amount payable under reverse charge shall be paid by debiting the
electronic cash ledger.
Services notified u/s 9(3)
S Category of Supply of Services Recipient of Service
No
1 GTA : Goods Transport Agency
Supply of Services by a goods transport agency a- any factory registered; or
(GTA) who has not paid GST at the rate of 12%, in b- any society registered; or
respect of transportation of goods by road. c- any co-operative society
established by or under any
law; or
Provided that nothing contained in this entry shall d- any person registered
apply to services provided by a goods transport under
agency, by way of transport of goods in a goods CGST/SGST/IGST/UTGST.
carriage by road, to, – e- Any body corporate
established, by or under
a- a Department or Establishment of the any law; or
Central Government or State Govt. or Union f- any partnership firm
whether registered or not
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territory; or
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b- local authority; or under any law including

association of persons; or
g- any casual taxable person
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c- Governmental agencies, which has taken
registration under the CGST only for the
purpose of TDS under section 51 and not for
making a taxable supply of goods or services.
2 Individual advocate including senior advocate or firm of advocates.
Services supplied by an individual advocate Any business entity located in
including a senior advocate by way of the taxable territory
representational services before any court, tribunal
or authority, directly or indirectly, to any business
entity located in the taxable territory, including
where contract for provision of such service has been
entered through another advocate or a firm of
advocates, or by a firm of
advocates, by way of legal services, to a business
entity
3 An arbitral tribunal
Services supplied by an arbitral tribunal to a business Any business entity located in the
entity taxable territory
4 Any person
Services provided by way of Any body corporate or partnership
sponsorship to any body corporate or partnership firm located in the taxable territory
firm
5 CG, SG, UTGST or Local authority
Services supplied by the Central Government, State Any business entity located in the
Government, Union territory or local authority to taxable territory
a business entity excluding, –

 renting of immovable property, and

 services specified below-
a- services by the Department of Posts by way
of speed post, express parcel post, life
insurance, and agency services provided to
a person other than Central Government,
State Government or Union territory or local
authority;
b- services in relation to an
aircraft or a vessel, inside or
outside the precincts of a port or an airport;
c- transport of goods or passengers.
5A CG, SG, Union territory or local authority
Services supplied by CG, SG, Union territory or local Any person registered under the
authority by way of renting of immovable property Central Goods and Services Tax
to a person registered under the CGST. Act, 2017.”
5B Any person
Services supplied by any person by way of transfer of Promoter
development rights or Floor Space Index (FSI)
(including additional FSI) for construction of a project
by a promoter
5C Any person
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Long term lease of land (30 years or more) by any Promoter

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person against consideration in the form of upfront

amount (called as premium, salami, cost, price,
 Badlani Classes
development charges or by any other name) and/or
periodic rent for construction of a project by a
promoter
6 A director of a company or a body corporate
Services supplied by a director of a company or a The company or a body corporate
body corporate to the said company or the body located in the taxable territory
corporate
7 An insurance agent (meaning as per Insurance Act)
Services supplied by an insurance agent to any Any person carrying on insurance
person carrying on insurance business. business, located in the
taxable territory
8 A recovery agent
Services supplied by a recovery agent to a banking A banking company or a financial
company or a financial institution or a NBFC institution or a non-banking
financial company, located in the
taxable territory
9 Author or music composer, photographer, artist, or the like
Supply of services by an author, music composer, Publisher, music company,
photographer, artist or the like by way of transfer or producer or the like, located in the
permitting the use or enjoyment of a copyright taxable territory
covered under clause (a) of sub-section (1) of section
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of the Copyright Act, 1957 relating to original literary,
dramatic, musical or artistic works to a publisher,
music company, producer or the like.
10 Members of Overseeing Committee constituted by the Reserve Bank of India
Supply of services by the members of Overseeing Reserve Bank of India.
Committee to Reserve Bank of India
11 Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or
limited liability partnership firm
Services supplied by individual Direct Selling Agents A banking company or a non-
(DSAs) other than a body corporate, partnership or banking financial company, located
limited liability partnership firm to bank or non- in the taxable territory
banking financial company (NBFCs).
12 Business facilitator (BF)
Services provided by business facilitator (BF) to a A banking company,
banking company located in the taxable territory
13 An agent of business correspondent (BC)
Services provided by an agent of business A business correspondent, located
correspondent (BC) to business correspondent (BC). in the taxable territory
14 Any person other than a body corporate
Security services (services provided by way of supply A registered person,
of security personnel) provided to a registered located in the taxable territory
person:

Provided that nothing contained in this entry shall

apply to:

1-
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a- a Department or Establishment of the

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Central Govt. or State Government or

Union territory; or
 Badlani Classes
b- local authority; or
c- Governmental agencies.

which has taken registration under the

Central Goods and Services Tax Act, 2017
only for the purpose of deducting tax
under section 51 of the Act and not for
making a taxable supply of goods or
services; or
2- a registered person paying tax under section
10 of the said Act.

Explanations:
1- The person who pays or is liable to pay freight for the transportation of goods by road in
goods carriage, located in the taxable territory shall be treated as the person who
receives the service for the purpose of this notification.
2- “Body Corporate” has the same meaning as assigned to it u/section 2(11) of the
Companies Act, 2013.
3- the business entity located in the taxable territory who is litigant, applicant or petitioner,
as the case may be, shall be treated as the person who receives the legal services for the
purpose of this notification.
4- “renting of immovable property” means allowing, permitting or granting access, entry,
occupation, use or any such facility, wholly or partly, in an immovable property, with or
without the transfer of possession or control of the said immovable property and
includes letting, leasing, licensing or other similar arrangements in respect of
immovable property.’
5- The term “apartment” shall have the same meaning as assigned to it in clause (e) under
section 2 of the Real Estate (Regulation and Development) Act, 2016.
6- the term “promoter” shall have the same meaning as assigned to it in clause (zk) under
section 2 of the Real Estate (Regulation and Development) Act, 2016.
7- the term “project” shall mean a Real Estate Project (REP) or a Residential Real Estate
Project (RREP);
8- “the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in in
clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016.
9- The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet
area of the commercial apartments is not more than 15 per cent. of the total carpet area
of all the apartments in the REP.
10- “floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor
area) to the size of the piece of land upon which it is built.”
Goods Notified u/s 9(3)
S/No. Description of supply of Supplier of goods Recipient of Goods
Goods
1. Cashew nuts, not shelled or Agriculturist Any registered person
peeled
2. Bidi wrapper leaves (tendu) Agriculturist Any registered person
3. Tobacco leaves Agriculturist Any registered person
4. Silk yarn Any person who Any registered person
manufactures silk yarn from
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raw silk or silk worm cocoons

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for supply of silk yarn

4A Raw cotton Agriculturist Any registered person.
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5. Supply of lottery State Government, Union Lottery distributor or
Territory or any local authority selling agent
6. Used vehicles, seized and Central Government, Any registered person
confiscated goods, old and State Government, union
used goods, waste and scrap territory or a local authority

Goods / Services notified u/s 9(4)

Category of supply of goods and services Recipient
1. Supply of such goods and services or both [other than services by way Promoter
of grant of development rights, long term lease of land (against upfront
payment in the form of premium, salami, development charges etc.) or
FSI (including additional FSI)] which constitute the shortfall from the
minimum value of goods or services or both required to be purchased
by a promoter for construction of project, in a financial year ( or part of
the financial year till the date of issuance of completion certificate or
first occupation, whichever is earlier) as prescribed.
2. Cement falling in chapter heading 2523 in the first schedule to the Promoter.
Customs Tariff Act, 1975 which constitute the shortfall from the
minimum value of goods or services or both required to be purchased
by a promoter for construction of project, in a financial year ( or part of
the financial year till the date of issuance of completion certificate or
first occupation, whichever is earlier) as prescribed.
3. Capital goods falling under any chapter in the first schedule to the Promoter
Customs Tariff Act, 1975 supplied to a promoter for construction of a
project on which tax is payable or paid at the rate prescribed for certain
items.
Explanation – For the purpose of this notification
1- “project” shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP_;
2- “Residential Real Estate Project (RREF)” shall mean a REP in which the carpet area of the
commercial apartments is not more than 15 percent of the total. Carpet area of all the
apartments in the REP.
 This notification shall come into force with effect from the 1st of April, 2019.

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