GST Update on Anomaly in Recent Twitter Clarifications

This is in continuation with GST update sent by us yesterday. Before bringing out the anomalies, it is necessary to give briefing of yesterday's update posted by us. It goes as follows:-

Twitter handle of Government of India has clarified two important queries:-

Query - RCM on freight to be deposited under IGST or CGST & SGST?
- It will always be deposited under CGST & SGST/UTGST.

Query - Registered in Delhi books unregistered hotel in Mumbai, reverse charge applicable? if yes, what to pay, IGST or CGST/SGST.
- You will pay only if you are registered in Maharashtra.

The above answers hold their roots in interpretation of section 9(3) and 9(4) of the CGST Act, 2017. Both of these sections as prescribe the provisions of reverse charge uses the language - "and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both."

The drafting of this section indicates that once the reverse charge mechanism is applicable on a transaction, all the provisions of this Act shall apply to RECIPIENT as if he is person liable for paying the tax in relation to such supply.

To determine whether a transaction is intra-state or inter-state, two factors are determinant:-
- Location of supplier; and
- Place of supply.

Now, according to the first interpretation of phrase highlighted above in section 9(3) and 9(4), it will be presumed that the location of deemed supplier (i.e. the recipient) will be checked.

Taking this interpretation, the location of supplier in the situation narrated in the tweets will be as follows:-

GTA services:-
Location of supplier = location of deemed supplier (assume it is at Delhi)
Place of supply = location of recipient, if he is registered = Delhi

Thus, according to this interpretation since location of supplier and place of supply are within same state, transaction will be intra-state and accordingly, CGST/SGST shall be payable. It is worthwhile to mention here that if this interpretation is taken, in case of GTA services, always CGST and SGST will be payable as the location of deemed supplier and place of supply will always be in the same state. While replying the above referred query relating to GTA; twitter handle of Government has taken this interpretation.

However, as per another interpretation, we can presume that the above phrase (that all the provisions of this act will apply on recipient as if he is the person liable for paying the tax) talks of only provisions related to payment of tax, i.e. the computation, due dates, filing of returns, etc. In other words, the location of supplier will be the location of ACTUAL SUPPLIER only. This interpretation has been taken while replying the another query relating to accommodation services in the twitter handle. According to this interpretation, the nature of tax payable will be determined in above two conditions as follows:-

Accommodation services:-
- Location of supplier = location of hotel = Mumbai
- Place of supply in case of accommodation services = location of immovable property = Mumbai

Thus, according to this interpretation since location of supplier and place of supply are in the same state, transaction will be intra-state and accordingly, CGST and SGST of Maharashtra shall be payable. Since the recipient of service is registered in Delhi as per query, CGST and SGST of Maharashtra are not applicable on him. Taking this interpretation, the twitter handle of Government has mentioned that the recipient registered in some other state will not be required to pay the tax under reverse charge as the provisions of that state will not apply on him.

After having a look on the queries, replies posted by Government in its twitter handle and after analyzing the provisions of section 9(3) and 9(4) of CGST Act, it is clear that government has taken dubious interpretation of same phrase while replying the two sets of queries under same situation. Thus, there is anomaly and which stand is to be taken while interpreting the other situations is not clear. However, one thing is clear that one cannot take two interpretations of the same phrase under the similar facts and circumstances. But, as of now, the above referred replies on twitter have added fuel to fire of ambiguities prevailing in the reverse charge.

You can reach us at www.capradeepjain.com and also at our facebook page at
https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/

Comments

GST Update on Anomaly in Recent Twitter Clarifications

Post a Comment

Query