1.Introduction
As per Section 2(98) of the CGST Act, 2017 ‘reverse charge’ means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of IGST Act, 2017.
It is pertinent to mention here generally it is the responsibility of the supplier to pay GST to the Government (though he can collect same from customer) which is apparent from section 9(1) of CGST Act / section 5(1) of IGST Act, 2017 wherein the taxable person viz supplier is liable to pay tax. However such liability for payment of tax is shifted onto the recipient where Government believes it would be administratively efficient and will ensure recovery of taxes and such payment by the recipient is referred to as payment under reverse charge mechanism.
In accordance to the powers conferred under section 9(3) of CGST Act, 2017 and under section 5(3) of IGST Act, 2017, Notification No. 13/2017-Central Tax (Rate) dated 28-6-2017 and Notification No. 10/2017-Integrated Tax (Rate) dated 28-6-2017 (RCM Notifications) have been issued by Govt, notifying the situations wherein certain supply of services would be under ambit of reverse charge mechanism.
As on date 22 services are under ambit of reverse charge mechanism (RCM) vide above cited notifications.
It may however be noted that in case any of these notified services are exempted from levy of GST, the recipient will not be required to GST under reverse charge mechanism.
Further in case any person is liable to pay GST under reverse charge mechanism as under, he will be required to obtain GST registration mandatorily in view of Section 24(iii) of the CGST Act,2017.
2. List of notified services on which GST is to be paid under Reverse Charge
The supply of services under reverse charge mechanism has been notified vide Notification No. 13/2017-Central Tax (Rate) dated 28-6-2017 as amended from time to time under Section 9(3) of the CGST Act, 2017 and the list of services that will be under reverse charge as notified by the Central Government is given below alongwith date from which reverse charge provisions are applicable on such services. These services are also notified for reverse charge under other GST Acts(s).
| Sr . No. | Category of Supply of Services | Supplier of Service | Recipient of service |
| (1) | (2) | (3) | (4) |
| 1. | GTA Service : Supply of Services by a Goods Transport Agency (GTA) who has not paid central tax @ 6% in respect of transportation of goods by road to specified recipients as mentioned in Column (4). Note: RCM shall NOT be applicable from 01.01.2019, on GTA services supplied to, – (a) a Department or Establishment of the Central / State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the CGST Act,2017 only for the purpose of deducting tax under Sec 51 and not for making a taxable supply of goods or services. (RCM applicable from 01.07.2017, however from 22.08.2017, RCM is applicable only where GTA has not paid CGST & SGST @ 6% each or IGST @ 12%). | Goods Transport Agency (GTA) | (a) any factory registered under or governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or (c) any cooperative society established by or under any law; (d) any person registered under CGST/IGST/ SGST/UTGST Act; or (e) anybody corporate established, by or under any law; or (f) any partnership firm (including LLP) whether registered or not under any law including association of persons; or (g) any casual taxable person located in the taxable territory. Note: As per Explanation (a) to RCM Notification(s) the person who pays or is liable to pay frieght for the transportation of goods by road in goods carriage, located in the taxable territory shall be traeted as the person who receives the GTA services. |
| 2. | Legal Service : Services provide by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly. (RCM applicable from 01.07.2017). | An individual advocate including a senior advocate or firm of advocates. | Any business entity located in the taxable territory who is litigant, applicant or petitioner, as the case maybe. |
| 3 | Arbitral Service: Services supplied by an arbitral Tribunal to a business entity. (RCM applicable from 01.07.2017). | An arbitral Tribunal | Any business entity located in the taxable territory. |
| 4 | Sponsorship Service: Service provided by way of Sponsorship Service to anybody corporate or partnership firm (including LLP). (RCM applicable from 01.07.2017). | Any person | Any body corporate or partnership firm (including LLP) located in the taxable territory. |
| 5 | Govt. Service : Services supplied by the Central / State Govt, Union territory or local authority to a business entity excluding the following : (A) renting of immovable property service, and (B) services specified below :- (i) services by the Department of posts by way of speed post, life insurance, express parcel post and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. (RCM applicable from 01.07.2017). | Central Government, State Government, Union territory or Local Authority | Any Business Entity located in the taxable territory. |
| 6 | Renting of immovable property Service by the Govt: Services supplied by the Central /State Govt, Union territory or local authority by way of renting of immovable property to a person registered under the CGST Act, 2017 (RCM applicable from 25.01.2018). | Central Government, State Government, Union territory or Local Authority. | Any person registered under the CGST / IGST / SGST Act, 2017 |
| 7 | TDR / FSI: Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter. (RCM applicable from 01.04.2019). | Any Person | Promoter |
| 8 | Long term lease: Long term lease of land (30 years or more) by any person 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 by a promoter. (RCM applicable from 01.04.2019). | Any person | Promoter |
| 9 | Director Service: Services supplied by a director of a company or a body corporate to the said company or the body corporate. (RCM applicable from 01.07.2017). | A director of a company or a body corporate | A company or a body corporate located in the taxable territory |
| 10 | Insurance Agent Service: Services provided by an insurance agent to person carrying on insurance business. (RCM applicable from 01.07.2017). | An Insurance Agent | Any person carrying on insurance business, located in the taxable territory. |
| 11 | Recovery Agent Service: Services provided by a recovery agent to a banking company or a financial institution or a non-banking financial company. (RCM applicable from 01.07.2017). | A Recovery Agent | Banking company or financial institution or a non-banking financial company, located in the taxable territory. |
| 12 | Copyright Service: Supply of Services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under Section 13(1)(a) of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like. (RCM applicable from 01.07.2017). | Music composer, photographer, artist, or the like. | The Music company, producer or the like, located in the taxable territory. |
| 13 | Copy right service by author: Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary works to a publisher. (RCM applicable from 01.07.2017). | Author | Publisher located in the taxable territory. RCM will NOT be applicable from 01.10.2019 where:- (i) the author has taken registration under the CGST Act,2017, and filed a declaration , in form at annexure I of RCM notification(s), within the time limit prescribed therein, with the jurisdictional CGST or SGST commissioner, that he exercises the option to pay central tax on such service, in accordance with Section 9 (1) of the CGST Act, 2017 under forward charge, and to comply with all the provisions of CGST Act, 2017 as they apply to a person liable for paying the tax in relation to the supply of any goods or services or both and that he shall not withdraw the said option within a period of 1 year from the date of exercising such option; (ii) the author makes a declaration, as prescribed in Annexure II of RCM notification(s) on the invoice issued by him in Form GST Inv-I to the publisher. |
| 14 | Overseeing Committee Service : Supply of services by the members of Overseeing Committee to Reserve Bank of India. (RCM applicable from 13.10.2017). | Members of Overseeing Committee constituted by the Reserve Bank of India. | Reserve Bank of India |
| 15 | Service by DSAs: 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). (RCM applicable from 27.07.2017). | Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm. | A banking company or a non-banking financial company, located in the taxable territory. |
| 16 | Business Facilitator Service : Services provided by Business Facilitator (BF) to a banking company. (RCM applicable from 01.01.2019). | Business facilitator (BF) | A banking company, located in the taxable territory. |
| 17 | Agent Service: Services provided by an agent of Business Correspondent (BC) to Business Correspondent (BC). (RCM applicable from 01.01.2019). | An agent of Business Correspondent (BC). | A business correspondent, located in the taxable territory. |
| 18 | Security Service: Security Services (services provided by way of supply of security personnel) provided to a registered person : (RCM applicable from 01.01.2019). | Any person other than a body corporate. | A registered person, located in the “taxable territory.” RCM shall NOT be applicable to,- (i)(a) a Department or Establishment of the Central / State Govt. or Union territory; or (b) local authority; or (c) Government agencies; which has taken registration under the CGST Act, 2017 only for the purpose of deducting tax under Sec 51 of the said Act and not for making a taxable supply of goods or services; or (ii) a registered person paying tax under composition scheme. |
| 19 | Renting of motor vehicle service: 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. (RCM applicable from 01.10.2019). | 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% to the service recipient. | Any body corporate located in the taxable territory”. |
| 20 | Security lending service: Services of lending securities of Securities under Lending scheme, 1997 (Scheme). Securities and Exchange Board of India (SEBI), as amended. (RCM applicable from 01.10.2019). | Lender i.e. a person who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the scheme of SEBI. | Borrower i.e. a person who borrows the securities under the Scheme through an approved intermediary of SEBI). |
It may be noted here that the tax is to be paid under reverse charge mechanism on all the above 20 services in case the supply is made by specified persons to specified persons as prescribed under RCM Notifications.
The tax will be paid under CGST Act as well as SGST Act viz CGST + SGST in case such supplies are intra-State supplies as defined under Section 8 of the IGST Act,2017. However IGST will be required to paid under reverse charge where such supplies of services are inter-State as defined under Section 7 of the IGST Act, 2017.
However in regard to inter-State supplies, apart from above 20 services the following two additional services has been notified by the Central Government vide Notification No. 10/2017-Integrated Tax (Rate) dated 28-6-2017 wherein whole of the tax viz IGST shall be payable by the recipient on services under Section 5(3) of IGST Act,2017 on Reverse charge basis.
| Sl. No. | Category of Supply of Services | Supplier of Service | Recipient of service |
| (1) | (2) | (3) | (4) |
| 1 | Import of Service: Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient. (RCM applicable from 01.07.2017). | Any person located in a non-taxable territory. | Any person located in the taxable territory other than non-taxable online recipient. |
| 2 | Ocean freight: Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the Customs Station of clearance in India. (RCM applicable from 01.07.2017). | A person located in a non-taxable territory. | Importer, as defined in Sec 2(26) of the Customs Act,1962, located in the taxable territory. |
Apart from above notified services the Govt. has also notified some situations under Section 9(4) of the CGST Act,2017 wherein tax is required to be paid under reverse charge mechanism. We shall be publishing a separate article on this shortly.
Before parting we would like to suggest our readers to study our following articles for understanding the reverse charge on legal services , GTA services , sponsorship and renting of motor vehicle services.
All about Reverse Charge Mechanism on Renting of Motor Vehicles
All about GST under Reverse Charge Mechanism on Legal Services
All about GST under Reverse Charge Mechanism on Goods Transport Agency Services
All about GST under Reverse Charge Mechanism on Sponsorship Services
Further we shall be publishing case studies , FAQs and articles on other topics under reverse charge. You are requested to revisit our site on periodic basis or you can subscribe to our site by feeding your e mail address on window provided on home page.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
excellent compilation in this article of all services subject to RCM saving the readers from looking for various notifications.