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August 23, 2022

Representation on RCM levy on Residential Property , Appeal and GTA Declaration

by CA Shivam Jaiswal in GST Circular Notification

Representation on RCM levy on Residential Property , Appeal and GTA Declaration

Date 19th Aug 2022

To
Smt. Nirmala Sitharaman
Chairman, Goods and Service Tax Council and
Hon’ble Union Minister of Finance, Government of India,
North Block, New Delhi – 110001

Subject: Representation on a) RCM levy on Residential Property b) GTA Declaration c) Appeal Related

Respected Sir/Madam,
We, Maharashtra Tax Practitioners’ Association (MTPA, formerly known as The Western Maharashtra Tax Practitioners’ Association), was formed in 1950 with the object to assist the professionals and resolve common problem faced by the tax professional. MTPA represents Tax Consultants, Advocates, Chartered Accountants & Cost Accountants who are practicing in taxation, corporate and other allied laws. Association’s primary objective is, to help the member to get acquaint with changes in various laws as well to help the government, by representing, issues faced by taxpayer as well as professionals

We are thankful to you for various measures taken on GST. We would like to invite your attention to below ambiguity and hardship faced by taxpayer.

A. CLARIFICATION REQUIRED ON BELOW ISSUES, RELATING TO RECENT 47TH GST COUNCIL DECISION, RELATING TO RCM ON RESIDENTIAL DWELLING, IN ORDER TO AVOID UNNECESSARY DISPUTE:

Vide Notification No. 05/2022 – CT Rate dated 13th July 2022, government has levied RCM on Renting of Residential Dwelling. Below is relevant Entry added in RCM category:

SI. NoCategory of Supply of ServicesSupplier of ServiceRecipient of Service
5AAService by way of renting of residential dwelling to a registered person.Any personAny registered person

o In this regard, there is lot of confusion and uncertainty, across the country, on below issues relating to said RCM Entry.
o We request you to kindly issue suitable clarification in this regard, on urgent basis to avoid unnecessary litigation and to ensure proper compliance of law

SI. NOISSUE FACEDDETAILS OF ISSUE AND RECOMMENDATION
1.What is the meaning of “RESIDENTIAL DWELLING” for the purpose of said RCM Entry?▪ DETAILS OF ISSUE:
There is lot of confusion as to meaning of term “Residential Dwelling”.
Confusion is as to applicability of said entry in case of –
✓ whether Guest House or flat taken on rent for short stay of employee of the company will be covered under it or not,
✓ Whether Residential Property used as Office / Godown/Warehouse will be covered under it or not
Meaning of Term Residential Dwelling is not defined anywhere in GST. Said term is explained by Para 4.13.1 Educational Guide on Service Tax by CBIC which defines Residential Dwelling as –“It is any residential accommodation, but does not include hotel, motel, inn, guest house, camp–site, lodge, house boat, or like places meant for temporary stay.”
▪ RECOMMENDATION:
If meaning as per Educational Guide on Service Tax is borrowed under GST, then GST will not be applicable
SI. NOISSUE FACEDDETAILS OF ISSUE AND RECOMMENDATION
under RCM on Guest House / Flat taken on Rent for temporary stay of employee.
In this regard, we request to issue suitable clarification in this regard, as to what is covered under term “Residential Dwelling”, in order to avoid unnecessary dispute and for better consistent compliance across the country.
2.Applicability and How to discharge GST liability in case of rented property is in another state, where register tax payer is not register.▪ DETAILS OF ISSUE:
Details of the issue is explained with the help of below example:
For Example: Company ‘A’ is having factory in Himachal Pradesh and registered under GST in Himachal State.
Marketing Employee/Staff of company are required to travel and stay in Punjab for customer visit. Therefore, company has taken Flat on rent in Punjab for temporary stay of its employee in Punjab. Since no supply / any other activity is undertaken from Punjab, ‘Company A’ has not obtained registration in Punjab.
In such case, whether RCM liability will arise? If yes, how to make payment of CGST/SGST of Punjab in Himachal Pradesh GSTIN?
▪ RECOMMENDATION:
Here, Taxpayer is not registered in Punjab. Therefore, we request to kindly issue clarification, in such scenario that, RCM will not be applicable, as Recipient of Service is not registered under Punjab State GST.
If government wish that, RCM liability will arise in such case, then there is practical problem for payment of CGST/SGST of Punjab state in Himachal Pradesh.
Therefore, there is urgent need to issue suitable clarification in this regards, to avoid unnecessary dispute and ensure proper compliance
SI. NOISSUE FACEDDETAILS OF ISSUE AND RECOMMENDATION
3.Whether Input Tax Credit of RCM liability on Residential Dwelling is allowed ?▪ DETAILS OF ISSUE:
On Large scale level discussion is going across Country on eligibility of ITC of RCM paid on Residential Dwelling?
Assuming if RCM is applicable in case of Residential Property used as office/Godown/Warehouse, then its ITC will be definitely be allowed, as it is used for business purpose.
However, Confusion is because, Sec 16 allows all ITC used for business purpose, whereas Sec 17(5) restrict ITC on personal usage.
Therefore, there is strong need to issue clarification on below:
a) ITC on RCM paid on Residential Property used as Guest House
b) ITC of RCM paid on Flat taken on Rent for temporary stay of Employee
c) ITC of RCM paid on Flat taken on Rent for Parment stay of Employee
▪ RECOMMENDATION:
There is strong view that, since Rented Property will be used for business purpose, its credit should be allowed.
RCM liability in the instant case is because, said residential dwelling is used for business purpose. Therefore, one cannot say that it is used for personal purpose and therefore ITC of the same should not be allowed.
Like when employee stay in Hotel for business visit, its ITC was allowed in general practice. Therefore, on the same logic suitable clarification should be issued about eligibility of ITC
SI. NOISSUE FACEDDETAILS OF ISSUE AND RECOMMENDATION
Due to this, there is urgent need to issue suitable clarification in this regards, to avoid unnecessary dispute and ensure proper consistent compliance across country.

B. APPEAL IS REJECTED AS ‘CERTIFIED COPY OF ORDER’ FROM AUTHORITY IS NOT SUBMITTED, WHERES AUTHORITIES ARE SENDING ORDERS ON EMAIL:

LEGAL PROVISION: As per Rule 108(3) of CGST Rules 2017,
A ‘certified copy of the decision or order’ appealed against shall be submitted within seven days of filing the appeal.

where the said copy is submitted after seven days, the date of filing of the appeal shall be the date of the submission of such copy

▪ HARDSHIP FACED:

As per Rule 108(3) of CGST Taxpayer is required to submit “Certified Copy of Order” to Appellate authority, after submission on appeal on GST Portal. However, what is meaning of certified copy of order is not provided in said rules. Whether it is to be certified by officer or taxpayer is not mentioned. Due to this different practice is adopted across India.


Also with the advent of technology and requirement of law, now a days, adjudicating authorities are sending notices on Email / Uploaded on Portal. Sometimes said notices are digitally signed. In such case, signed Hard copy of Order is not provided to taxpayer.

It is observed that, Appellate authorities are rejecting the appeal, in case of Certified copies of order from authorities is not submitted by taxpayer, (whereas self-certified copy of order is submitted).

This is resulting into Big Hardship on Taxpayer for his no mistake.

Just for this small issue, which is also due to ambiguity in provision and change in methodology of sending notices on Email/Portal, Taxpayer is required approach High Court for Relief. Below are few instances, where high court has given relief to taxpayer on the issue of “Certified Copy of Order”

o DEBABRATA SANTRA VS ASSISTANT COMMISSIONER OF REVENUE, TAMLUK CHARGE & ORS
[ Calcutta High Court – WPA 17055 of 2022 dt. 16.08.2022]
o M/S. SHREE UDYOG VERSUS COMMISSIONER OF STATE TAX ODISHA, CUTTACK AND OTHERS
[2021 (6) TMI 636 – ORISSA HIGH COURT , W.P.(C) No.14887 of 2021 dt 10th June 2021 ]

▪ RECOMMENDATION:

Since now a days authorities are providing Copies of Order on email/Portal, it is recommended that,


▪ Kindly remove said requirement of submission of Certified copy of Order.
OR
▪ Else, Certified Copy is to be defined to include Certified by Taxpayer.

We are moving towards, Ease of Doing Business. Such ambiguous requirement cause hindrance to Ease of Doing Business and access to appeal mechanism for justice. Therefore, we request to kindly make suitable amendment in regulation or issue circular, on the line with above mentioned recommendation.

C. GTA – TIME LIMIT OF 16.08.2022 FOR SUBMISSION OF ‘ANNEXURE V’ AS PER NOTIFCATION NO 3/2022 CT RATE DATED 13TH JULY 2022, IS TO BE CONDONED DUE TO HOLIDAY IN VARIOUS PARTS OF COUNTRY FROM 13TH AUG TO 16TH AUG:

As per above referred notification, Goods Transport Agent (GTA) who wish to opt Forward Charge Mechanism is required to submit Declaration in Form Annexure V upto 16th Aug 2022. However, in many parts of country, there happens to have holiday from 13th Aug 2022 to 16th Aug 2022. Due to which many Transporters who wish to submit said form are unable to submit or submitted after date mentioned.

This restriction, is directly affect entry in Forward Charge and it might attract unnecessary dispute. Therefore request to :

o kindly issue suitable clarification or amendment in said notification so as to provide further period of 1-2 week or delay condonation in submission of the same, as consequently 4 days holiday was there from 13th Aug to 16th Aug.

o Also, it is requested that online option for submission of Annexure V should be provided at earliest on GST Portal.

We again request our government to kindly take note of above issue and issue suitable clarification / amendments. This will help to achieve objective of:

▪ Ease of Doing Business
▪ Unnecessary Dispute and litigation can be avoided if recommendation are accepted.

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