Reverse Charge Mechanism(RCM)

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 Reverse Charge Mechanism(RCM)
1. Liability to pay tax by the person receiving goods and
services instead of the supplier
2. Goods and services subject to RCM. Services which are
under RCM at present are- transport services,
lawyer’s fees, import of services, sponsorship fees,
payments to directors)
3. Persons liable under RCM are required to be registered
irrespective of the threshold limit specified
4. GST under RCM shall be paid only through cash ledger and
not from Input Tax Credit. However, RCM once paid shall be
eligible Input Tax Credit and can be utilized for payment of
GST charged on supply of goods and services

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 Goods sent on approval basis
1. It is not a supply
2. Deemed to be a
‘supply’ after the
completion of 6
months

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 Principal Agent Relation
Situation 1
Appolo Ltd. Appoints Mr. Dalal to procure certain goods from the market. Mr.
Dalal identifies the vendors and asks the vendors to send the goods and issue
the invoice directly to Appolo Ltd

Situation 2
Lena Bank appoints Mr. Broker to auction the goods. The auctioneer arranges
for the auction and receives the bids. The highest bid is accepted and the
goods are sold to the highest bidder by the bank. The invoice is issued by the
bank

Situation 3
A Company delivers the goods to C & F agent. The agent sells the goods to the
local customer and issues the invoice in his own name

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 Case studies
1. HPPL Singapore Ltd. gives a corporate guarantee, for a loan taken by its Indian
subsidiary, without charging any fees
2. Computers purchased 1 year ago (Input Tax credit was taken) given to employees
free of cost
3. Maruti Ltd. supplies automobile spare parts to Sai Services for any repairs job. Sai
Services to pay Maruti only after the parts are sold to customers
4. A dress manufacturer supplies dresses to Shoppers’ Stop for sale. Shoppers’ Stop to
retun the goods if not sold for 3 months
5. Branch stock transfers within the same State (Mumbai to Pune)
6. Branch stock transfers within the same State for 2 verticals (Cloth and tailoring), if
separate registration is taken for each place of business
7. Branch stock transfers (located in 2 States) e.g. Mumbai and Ahmedabad
8. CRY- an NGO supplies foods articles to poor children free of cost
9. Vijay sales gives 1 hair dryer free for purchase of Freeze
10. Repairing of air-conditioner done by the manufacturer during warranty period
11. A furniture manufacturer supplies furniture for powder coating to a job-worker
12. Vedant Ltd pays Rs. 50 lakhs to Mr. Harish Salve, Lawyer for representing in
Supreme Court
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Place of supply

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 Place of Supply- New Game, New
Rules
Same State Intra Inter Different State
State State
Supply Supply
Location
of Location
Supplier
SGST of supplier

IGST

CGST Place of
Place of
Supply Supply

Importance of documentation

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 Supply involving movement of goods

- Place of supply=location of the goods at the time at which the

movement of goods terminates for delivery to the
recipient
Tata Steel CGST + SGST Cummins Ltd.
Mumbai Pune

L&T Switches IGST Philips Ltd.

Mumbai Baroda

ACC Cements Delivers up to Guj.Narmada

Mumbai Bhiwandi Ahmedabad

IGST 69
Supply by way of transfer of documents
of title

- Goods delivered by supplier on the direction of buyer,

Place of supply= Principal place of business of buyer

Haresh
Chemicals, Ship to
Mumbai
Sun Pharma
IGST Bill to factory in
Gujarat
Sun Pharma IGST
Corporate
office Delhi
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Suggested- Decentralised POs
 Supply not involving movement
of goods
Place of supply = Location of such goods at the time of
delivery to the recipient
Illustration 1
Sale of articles in a shopping mall

Illustration 2
Sale of factory premises along with machinery installed

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 Goods assembled or installed at site

- Place of supply= Place of installation or assembly

Lodha
Builders,
Mumbai
Contracts
IGST Site at Indore

M/s Eros
Elevators,
Mumbai
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Goods supplied on board of
conveyance (Toys, Books)
Place of supply- Location at
which goods are taken on
board

CGST + SGST

Mumbai 73
 Place of supply – Goods-
Summary
Transaction Type Place of supply

Delivery to buyer Buyer

Delivery to any other taxable person as Buyer

instructed by buyer

Delivery completed at place of supplier Seller’s place

Goods assembled at buyer’s site Site address

Goods supplied during travel Place of seller where

goods are loaded

Slide courtesy- SPJIMR PGMPW 2021 Finance Batch

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 Place of supply for Services
Nature of Supplier- Supplier- Either supplier
supply recipient in recipient in or recipient
India India outside India
Business to Business to
Business (B2B) Customer (B2C)
General Rule Location of Location of Location of
Service recipient Service recipient- Service recepient
if address on
record
Location of
Supplier- if
address not on
record

Immovable Location of Location of Location of

property immovable immovable immovable
property-Hotel property property
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accommodation
charges? ITC?
Nature of service Place of service

Place of supply-Specified
Performance based-Restaurant, catering,
services
Location where services are actually
personal grooming, fitness, beauty performed
treatment, health services including plastic
and cosmetic surgery

Admission to an event Place where the event is held

Organising an event To a Registered person- Location of such
person
To an Unregistered person-Place where
event is held

Training & performance appraisal To a Registered person- Location of such

person
To an Unregistered person-Place where
event is held

Transportation of goods by mail or courier Place of destination of goods

Passenger transportation Place where he embarks
On Board services First scheduled point of departure
Intermediary (Foreign party)-order booking Location of supplier 76