Whether the same will be
covered under Import of Services.
The
term ‘reverse charge’ as defined in the Act is reproduced below:
‘’reverse
charge’’ means the liability to pay tax by the recipient of goods or services
or both instead of the supplier of 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 the Integrated Goods and Services Tax Act;’’
Thus there are totally four
subsections under which RCM liability can arise. Let’s analyse them in deep
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both
under sub-section (3) of section 9 of CGST act, or under sub-section (3) of
section 5 of the Integrated Goods and Services Tax Act
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11
Specified services notified by Govt via various notification.
2 additional services notified under IGST act via Notification No. 10/2017- Integrated Tax (Rate) .
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Sub-section
(4) of section 9 or sub-section (4) of section 5 of the Integrated Goods and
Services Tax Act
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These sections were kept in abeyance till 30/09/19 vide notification
no. 12/2018 Central Tax (Rate).
On
29th March,
2019 through Notification
No. 07/2019 Central Tax (Rate) the Govt has notified only 3 type of Good and
services. Thus in the present scenario Section 9(4) is
only applicable for the “Promoters” who are engaged in Supply of the above
mentioned services, without any exemption limit.
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Clearly booking of travel package/Hotel
abroad is not notified under 11 specified services u/s 9(3) and 3 specified
services under 9(4). Thus the only notification which plays devil in our case
and tries to levy GST under RCM is Notification
No. 10/2017- Integrated Tax (Rate).
Lets read the relevant notification under detail:-
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Service
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Supplier
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Receiver
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i
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Any
service supplied by any person who is located in a non-taxable territory to
any person other than non-taxable online recipient
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Any
person located in a
non-taxable territory |
Any
person located in the taxable territory other
than nontaxable online recipient. |
On the plain reading of the
above it appears that any service provided from outside country to anyone
inside country is covered under RCM via Sec 5(3) of IGST act vide Notification No. 10/2017- Integrated
Tax (Rate).
Now
let’s explore the savior sections and clauses.
The Rule 33 of the CGST Rules, 2017 read as under:
Value of supply of service in case of
pure agent:
Notwithstanding anything contained in the
provisions of this Chapter, the expenditure or costs incurred by a supplier as
a pure agent of the recipient of supply shall be excluded from the value of
supply, If all the following conditions are satisfied, namely,-
(i) the supplier acts as a pure agent of
the recipient of the supply, when he makes the payment to the third party on
authorisation by such recipient;
(ii) the payment made by the pure agent
on behalf of the recipient of supply hos been separately indicated in the
invoice issued by the pure agent to the recipient of service; and
(iii) the supplies procured by the pure
agent from the third party as a pure agent of the recipient of supply are
in addition to the services he supplies on his own account.
Explanation.- For the purposes of this
rule, the expression “pure agent” means a person who-
(a) enters into a contractual agreement
with the recipient of supply to act as his pure agent to incur expenditure or
costs in the course of supply of goods or services or both;
(b) neither Intends to hold nor holds any
title to the goods or services or both so procured or supplied as pure agent of
the recipient of supply;
(c) does not use for his own interest
such goods or services so procured; and
(d) receives only the actual amount
incurred to procure such goods or services in addition to the amount received
for supply he provides on his own account.
The GST Act defines an Agent as a person
including a factor, broker, commission agent, orhatia, del credere agent, an
auctioneer or any other mercantile agent, by whatever name called, who carries
on the business of supply or receipt of goods or services or both on behalf of
another.
So, who is a pure agent and why is a pure
agent relevant under GST? Broadly speaking, a pure agent is one who while
making a supply to the recipient, also receives and incurs expenditure on some
other supply on behalf of the recipient and claims reimbursement (as actual,
without adding it to the value of his own supply) for such supplies from the
recipient of the main supply. While the relationship between them (provider of
service and recipient of service) in respect of the main service is on a
principal to principal basis, the relationship between them in respect of other
ancillary services is that of a pure agent.
The important thing to note is
that it pure agent does not use the goods or services so procured for his own
Interest and this fact hos to be determined from the terms of the contract.
Another important fact is that, the person who provides any service as a pure
agent receives only the actual amount for the services provided.
Thus The value of ‘hotel
accommodation’ paid by the client to them, which is remitted by them to the
foreign hotel / hotel aggregator cannot be included in such taxable value,
provided the conditions of pure agent are satisfied.
