GST update on How to comply with 9(4) of CGST Act if POS is in another State of the unregistered supplier?

As per FAQs issued by CBEC in this regard, any person making inter-state supply has to compulsorily obtain registration and hence he will always charge tax on inter-state supplies made by him. Therefore in cases where Place of Supply (POS) is in another state, section 9(4) which deals with payment of tax under reverse charge on procurement of goods or servicesor both from unregistered person will not come into play. Hence, the question of paying tax by recipient on reverse charge basis in this case does not arise.

However, in cases where POS is in the state of unregistered supplier, tax has to be paid by registered recipient under reverse charge. What would happen if the registered recipient is in another state? The issue which arises is regarding the type of tax to be paid, i.e., IGST or CGST and SGST and the manner in which the payment is to be made.

To illustrate, Mr. A, a registered person from Rajasthan takes service of Renting of immovable property or accommodation in a hotel in Maharashtra from an unregistered person, Mr. B.

As per section 9 of the CGST Act, 2017, it shall be the liability of registered recipient of the goods or services (i.e. Mr. A) to pay tax on reverse charge basis on procurement of goods or services from unregistered person and all other 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.

Also, as per section 12 of the IGST Act, 2017 the place of supply of services by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located. Hence, the POS in this case comes out to be Maharashtra.

But, Mr. A is registered in the state of Rajasthan and hence he cannot pay CGST and SGST in the state of Maharashtra as he is not registered there. Also, since the POS is Maharashtra, IGST is not to be paid on the said transaction. Hence, the ambiguity arising in the present case is regarding the type and manner of payment of tax.

No clarification in respect of the same has yet been issued by the Government and the issue remains unresolved.

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GST update on How to comply with 9(4) of CGST Act if POS is in another State of the unregistered supplier?

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