GST under RCM: When to pay (Basic level)

[CASanjay Kumawat]

[With reference to deferment of RCM provision given under section 9(4) of CGST Act and section 5(4) of IGST Act]

Generally, the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Reverse charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

There are two type of reverse charge scenarios provided in the GST law:

1. First is dependent on the nature of supply and/or nature of supplier, like GTA, legal services from Advocates, insurance agent services to company. This scenario is covered by section 9 (3) of the CGST/ SGST (UTGST) Act and section 5 (3) of the IGST Act.

2. Second scenario 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.

When to pay GST under RCM (Time of Supply)

The time of supply is the point when the supply is liable to GST. One of the factor relevant for determining time of supply is the person who is liable to pay tax. In reverse charge, the recipient is liable to pay GST. Thus, time of supply for supplies under reverse charge is different from the supplies which are under forward charge.

In case of supply of goods (Section 12 of the CGST Act, 2017), time of supply is earliest of: -

1. date of receipt of goods; or
2. date of payment as per books of account or date of debit in bank account, whichever is earlier; or
3. the date immediately following thirty days from the date of issue of invoice or similar other document.

In case of supply of services (Section 13 of the CGST Act, 2017), time of supply is earliest of: -

1. date of payment as per books of account or date of debit in bank account, whichever is earlier; or
2. the date immediately following sixty days from the date of issue of invoice or similar other document.

Deferment of applicability of Section 9(4) of the CGST Act, 2017 and Section 5(4) of the IGST Act, 2017

The Central Government vide Notification No. 32/2017-Integrated Tax (Rate)- 13.10.2017 has exempted the inter-State supply of goods or services or both received by a registered person from unregistered supplier from the whole of the IGST leviable thereon under section 5(4) of the IGST Act. It may be noted that the exemption contained in this Notification shall apply to all registered persons till the 31^st day of March, 2018. On the similar lines, Notification No. 38/2017-Central Tax (Rate) dated 13.10.2017 has been issued under CGST Act, 2017.

With effect date of the deferment has not been provided in this notification. Accordingly, in view of the various judicial pronouncements, it is to be considered that this is applicable from 13.10.2017 only, i.e., date of issue of notification.

In view of the above, whether commercial invoice issued by the unregistered supplier upto 12.10.2017 would be subject to levy of GST under RCM? Answer to this question can be derived from the time of supply provisions. One should not blindly say that “yes, GST is payable under RCM”.

To understand this, let’s take an example:

M/s XYZ C&F (Recipient) has taken a premise on lease from an unregistered supplier. Rent payable amount is ₹ 30,000/- Per Month and due date is 4^th of the first week. Recipient has also taken AMC of the premise for ₹ 7,000/- Per Month and due date is last day of the month.

For the month of September, 2017, rent is due on 4^th September, 2017 and AMC charges due on 30^th September, 2017. Payment for the dues is to be made on 31^st October, 2017.

What is the due date when recipient is liable to pay GST under RCM?

As per section 13 of the CGST Act, 2017, time of supply is earliest of: -

1. date of payment as per books of account or date of debit in bank account, whichever is earlier; or
2. the date immediately following sixty days from the date of issue of invoice or similar other document.

Date of payment is 31^st October, 2017 and 60 days from the date of issue of invoice by the supplier is 3^rd November, 2017. Therefore, time of supply in this case is 31^st October, 2017 (earliest of payment date or 61th day from the date of issue of invoice.)

GSTR-3B of the September has been filed upto 20^th October, 2017. Therefore, this discussion may relevant for the period starting from the 1^st October, 2017 to 12^th October, 2017.

Accordingly, a registered recipient is not required to pay GST under RCM under section 9(4) of the CGST Act, 2017 and section 5(4) of the IGST Act, 2017 in respect of supplies received by him in the said period unless its time of supply is falling on or before 12^th October, 2017.

Note: The author can be reached at [email protected].