RCM Notification 13/2017 Central Tax ( Rate) status of Limited Liability Partnership, Goods and Services Tax - GST

[hubert fernandes]

What is the status of Limited Liability Partnership Firm for the purpose of RCM Notification 13/2017 Central Tax ( Rate),whether Limited Liability Partnership Firm is a "Body Corporate" or a Partnership Firm ? Refer to Point (b) in explanation where its states “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013 (which is a inclusive definition) and point (e) A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.

Posts / Replies

[Shilpi Jain]

Why is the doubt? As per the provision you have extracted it is clear it is a firm.

[hubert fernandes]

Thanks Shilpi Jain Mam

[hubert fernandes]

However the explanation at "b: to Notification 13/2017 central tax rate :still stands QUOTE b) “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013.UNQUOTE

and clause e of explanation (e) A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.]

are clause "b" and clause "e" not contradictory ? for the purpose of Discharge of GST as against Category of Supply of Services at serial no 15 of Notification No. 13/2017- Central Tax (Rate) dated 28/6/17

Please advise

Regards

[Ganeshan Kalyani]

The definition in the cited Notification clarifies LLP as "partnership firm" or "a firm".

[hubert fernandes]

In continuation to my Earlier Reply (2), it is possible to interpret that LLP is a body corporate for the purposes of the Companies Act, 2013 and accordingly the Notification as well. However, the said interpretation may not result a harmonious reading,taking into account that the said notification also defines 'LLP' separately

[Ganeshan Kalyani]

Sir, both the definition are separately given i.e. "Body Corporate" is defined in (b) and "LLP" in (e). Both to be read separately.

[hubert fernandes]

Point (b) in explanation where its states “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013 which is a inclusive definition

The term 'body corporate' as defined in the Notification draws reference to the Companies Act, 2013. Section 2(11) of the Companies Act, 2013 provides for an inclusive definition of body corporate and states that it includes a company incorporated outside India, but does not include,

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf;

LLP is a body corporate under the Limited Liability Partnership Act, 2008 (LLP Act). The definition of body corporate under the Companies Act, 2013 excludes any other body corporate only if the Central Government has specified such body corporate vide notification 8. Reference is made to the General Circular No.30A/2011 dated 26.05.2011 issued by Ministry of Corporate Affairs (MCA) stating that LLP is not a body corporate for the limited purpose of Section 226(3)(a) of the Companies Act, 1956 (appointment of auditor).

Hence, it is inferred that an LLP is a body corporate for the purpose of the Companies Act, 2013 and the same would apply to the term 'body corporate' for the purpose of Notification No. 13/2017-CGST (Rate) dated 28.06.2017. However, the said Notification also states that LLP shall also be a partnership firm or a firm.

[SOWMYA CA]

The treatment of the transaction notified u/s. 13/2017 Central Tax (Rate) will be the same irrespective of whether you are a LLP/Firm/Body Corporate. All are covered for RCM liability.

[hubert fernandes]

In RCM Notification 13/2017 Central Tax ( Rate) for

Serial No.15 : "Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate.

Service Provider :Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent.

Recipient of Service : Any body corporate located in the taxable territory

Is Limited Liability Partnership Firm needs to Pay GST under RCM ?

[KASTURI SETHI]

In this scenario as explained by the querist, LLP is covered under RCM for the purpose of payment of GST.

[hubert fernandes]

Dear Kasturi Sir,

Thank you for your reply

There is No Doubt LLP is covered under RCM.

My real query is whats is the status of Limited Liability Partnership Firm for the Purpose of RCM notification .is it BODY CORPORATE or PARTNERSHIP Firm ?

[KASTURI SETHI]

Undoubtedly Body Corporate.

[hubert fernandes]

Dear Kasturi sir,

Thank you for your advice ,

But in RCM notification 13/2017 in Explanation part point (e) states A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.

[Shilpi Jain]

I remember reading some case law in this regard that LLP is not a body corporate.. let me lay my hands on it to share

[KASTURI SETHI]

SH.Hubert Fernandes Ji,

Here is a case law in your favour but it pertains to Service Tax law. You can take shelter in GST also inasmuch as criteria for RCM by and large remains the same in GST laws.

SRL ADVISORS LLP Versus COMMISSIONER OF CENTRAL TAX, DELHI SOUTH COMMISSIONERATE - 2021 (7) TMI 1195 - CESTAT NEW DELHI

[KASTURI SETHI]

Relevant Extract of Press Release No. 33/2019, dated 20-9-2019

"16. To allow RCM to suppliers paying GST @ 5% on renting of vehicles, from registered person other than body corporate (LLP, proprietorship) when services provided to body corporate entities."

"Note : It is proposed to issue notifications giving effect to these recommendations of the Council on 1st October, 2019."

[hubert fernandes]

Dear Kasturi Sir,

My observations

Reference is made to Explanation (e) 6 to Notification No. 13/2017-CGST (Rate) dated 28.06.2017, wherein it is stated that an LLP formed and registered under the provisions of the LLP Act shall also be considered as a partnership firm or a firm .

The discussions in the 20 th GST Council Meeting throws light on the intention behind inserting the said explanation in Notification No. 13/2017-CGST (Rate) dated 28.06.2017. It has been inserted to provide clarity with respect to the legal services provided by a firm as to whether LLP is included within the meaning of the firm as LLP is a body corporate under the LLP Act.

By inserting the said explanation, Government has expressly included LLP under the umbrella of a partnership firm. Prior to this, LLP was considered as a firm for the limited purpose of Chapter XV of the CGST Act 9 (Liability to pay in certain cases).

Hence, it is inferred that an LLP is a body corporate for the purpose of the Companies Act, 2013 and the same would apply to the term 'body corporate' for the purpose of Notification No. 13/2017-CGST (Rate) dated 28.06.2017. However, the said Notification also states that LLP shall also be a partnership firm or a firm.

ERSTWHILE REGIME

The definition of 'body corporate' under Section 2(7) of the Companies Act, 1956 was also similar to the definition provided in Companies Act, 2013. The said definition was incorporated in the erstwhile service tax regime as well.

Reference is made to the recent decision of CESTAT in the case of SRL Advisors LLP v. Commissioner Of Central Tax, Delhi South Commissionerate -2021 (7) TMI 1195 - CESTAT NEW DELHI , wherein the issue was,whether LLP is liable to discharge service tax for the receipt of manpower services. The Tribunal relied on the definition of 'body corporate' and held that any other body corporate which includes an LLP is specifically excluded from the definition of body corporate. It is to be noted that Rule 2(cd) of the Service Tax Rules defined partnership firm to include LLP, whereas under the GST Notification,the explanation states that LLP shall also be considered as a partnership firm or firm.

Based on a reading of the definition of LLP in the Notification,intention behind specifically defining LLP, and that "partnership firm" and "body corporate" are specifically identified as recipients, it is possible to take a view that there it is an implied exclusion of an LLP from the term 'body corporate' under the Notification. However,out of abundant caution,one can interpret that the term 'body corporate may include LLP for the purpose of discharging GST on reverse charge basis for renting of motor vehicle services received.

FOR YOUR VIEWS

Regards

Hubert Fernandes

[KASTURI SETHI]

Dear Sh.Hubert Fernandes Ji,

Notification No.13/17-CT(R) has been amended vide Notification No.22/17-CT(R) dated 22.8.17 which is as follows :-

“(e) A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.”.

[Notification No. 22/2017-C.T. (Rate), dated 22-8-2017].

In the above notification note the words, "shall also" have been used. When the word,'shall' is used, it means legal position is mandatory. Also focus on the word, 'also'. Govt. has not used only the word 'shall' but also the word 'also'. So the status of LLP as Body Corporate has not lost its sheen in the light of insertion of above Explanation to original notification no.13/17-CT(R).

Hence your decision is right and also safe. Whenever there is somewhat ambiguity in law, it is better and safe to take decision in the interest of the Revenue and avoid avoidable interest and penalty. It is revenue neutral situation.

Govt.'s major purpose for implementation of RCM scheme is to get the transaction accounted for in the books of account of both parties (seller and buyer/recipient) and thus plug the possibility of leakage of revenue.

[CAHemanth Kumar]

Dear Sir,

We may need to see the other entries of RCM notification to get clear scope of body corporate and understand whether

1. Body corporate includes LLP or

2. Body corporate does not includes LLP

S.No.11 of notification No.13/2017

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)

If we see S.No.11,it clearly states body corporate, partnership or limited liability partnership firm.

from the above entry we can see that LLP was treated as a separate person and not as a body corporate in case if the law maker treats LLP as a body corporate there is no need to mention again LLP in the RCM entry.

Thereby in my view, LLP will not be considered as a body corporate and in case if we treat LLP as body corporate Explanation (e) to the said notifications will become redundant.

Also we need to consider that in case if there is any ambiguity in a charging provision benefit must necessarily go in favor of assesse as held by SC in the case of M/s DILIP KUMAR AND COMPANY AND ORS vs Commissioner of Customs 2018 (7) TMI 1826 - SUPREME COURT

Regards

CA Hemanth Kumar