Page 11 - Chap2 RCM

Q.10: State, with reason, the person liable to pay GST in each of following independent cases:-
Assume recipient is located in taxable territory.
(i) Rental income received by Tamil Nadu State Government from renting an immovable property to
Mannappa Pvt. Ltd. (Turnover of the company was ` 22 lakhs in the preceding F.Y.).
(ii) Legal Fees received by Mr. Sushrut, a senior advocate, from M/s. Tatva Trading Company having
turnover of `50 lakhs in preceding financial year.
(iii) Services supplied by a recovery agent to a car dealer.
(iv) XYZ Ltd. availed services of Vimal Goods transport agency for transportation of goods by road from
factory located in New Delhi to its Jaipur depot and paid freight of `1,00,000 where the GST is charged
at the rate applicable. Vimal Goods transport agency is registered under GST & has exercised the
option to pay tax under forward charge.
What will be your answer if GTA has not exercised the option to pay tax under forward charge?
(v) Sponsorship services provided by a partnership firm to an individual.
(vi) Mr. Arun Kumar, an individual based in Delhi, owns a commercial office space in Connaught Place. He
is not registered under GST, as his total turnover falls below the prescribed threshold. Mr. Arun rents
out this commercial property to M/s TechNova Pvt. Ltd., a GST-registered private limited IT company
that uses the premises for business purposes. Determine who is liable to pay tax.
Would your answer, differ if M/s TechNova Pvt. Ltd. opt for Composition Scheme.
Answer:-
(i) Legal Provision:- As per section 9(3) of CGST Act, 2017, if service of renting of immovable property is
provided by the Central Government, State Government, Union Territory, or local authority to any
registered person located in the taxable territory, then GST is payable under reverse charge by recipient.
Discussion & Conclusion:-
Ø In the given case, Mannappa Pvt. Ltd. is registered under GST as the turnover of the company was ` 22 lakhs
in the preceding financial year which is exceeding threshold limit for registration u/s 22 of CGST Act.
Ø So, here, the State Government of Tamil Nadu provided service of renting of immovable property to
a registered person located in taxable territory.
Ø Therefore, Mannappa Pvt. Ltd. is liable to pay GST under reverse charge.
(ii) Legal Provision:- As per section 9(3) of CGST Act, if legal services are supplied by a senior advocate to
any business entity located in the taxable territory, then GST is payable on reverse charge basis by recipient.
Discussion & Conclusion:-
Ø In the given case, Mr. Sushrut is a senior advocate & he is supplying legal services to M/s. Tatva Trading
Company i.e. a business entity.
Ø Thus, M/s. Tatva Trading Company is liable to pay GST under reverse charge.

(iii) Legal Provision:- As per section 9(3) of CGST Act, if services are supplied by a recovery agent to a
banking company or a financial institution or a non- banking financial company (NBFC) located in
the taxable territory, then GST is payable on reverse charge basis by recipient.
Discussion & Conclusion:-
Ø In the given case, services are being supplied by a recovery agent to a car dealer & not to a banking
company or financial institution or NBFC.
Ø Thus, service provider i.e. the recovery agent is liable to pay GST under forward charge.

(iv) Legal Provision:-
Ø As per section 9(3) of CGST Act, if service of transportation of goods by road is provided by a GTA to a is
a specified recipient, i.e., a body corporate established by or under any law, then such body corporate is
liable to pay tax under reverse charge.
Ø However, if the registered GTA has exercised the option to pay tax under forward charge on
transportation of goods and also issued a tax invoice to the recipient charging Central Tax at the
applicable rates with a declaration thereon, then the GTA is liable to pay tax under forward charge.
Discussion & Conclusion:-
Ø In the first case, XYZ Ltd. is a specified recipient, i.e., a body corporate established by or under any law
liable to pay freight.
Ø However, GTA has exercised the option to pay tax under forward charge and also issued a tax invoice
charging GST at the applicable rate.

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