Registration Question No.82

QUESTION

XYZ PvtLTd is registered under companies act on 29/04/2019. The GST registration is obtained on 14/02/2020 voluntarily. The said company is in the business of obtaining and supplying OIDAR services. Company has obtained (Imported) on rent space on servers located outside india from persons outside india and futher rented said space to customers in india and also outside india. All the transactions are not possible without the use of internet. Before the date of registration under GST, Company has obtained (purchased) OIDAR services to the tune of Rs 9 lacks and supplied (Sold) services to the tune of Rs 6 lacks without charging any GST. On this back ground we would like to know 1. When was registration under GST was required to be taken? 2. Whether GST is payable under RCM mechanism for services imported before the date of registration? 3. Whether GST is payable on (Sale) turnover of Rs 6 lacks done before the date of registration? 5. If answer to Question No 2 above is affirmative Whether credit of said RCM paid will be available as ITC? 6. Whether interest is payable on RCM amount ? 7. Whether any penalty would be payable by the company?

ANSWER

Facts of the case: XYZ co. is in the business of receiving and supplying OIDAR services. The company has imported OIDAR services to the tune of 9 Lakh.

Law Applicable:
1. As per section 2(16) of IGST Non Taxable Online Recipient is defined as
" means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory. "

2. As per section clause (1) of notification 10/2017 IGST following recipients are required to deposit tax on RCM basis
"Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient."

Interpretation: RCM is applicable if any person has other than non taxable online recipient imports OIDAR service from a non taxable territory i.e outside india. In our case XYZ is "other than non taxable online recipient since it does not fall under the definition laid u/s 2(16) of IGST.
Therefore RCM is applicable and XYZ is liable to pay the tax on import of service.

As per clause (v) of section 20 IGST all the act, rules and regulations relating to registration laid under CGST shall mutatis mutandis be applicable to IGST law as well.

Therefore section 24 subsection (3) CGST can mutatis mutandis be applied in this case which makes it mandatory to get registration under GST if a person is in receipt of a taxable RCM input.

Conclusion:
Answer 1. Notification 10/17 clause (1) read with section 2(16) and 20(v) of IGST and 24(3) of CGST makes it compulsory that regegiseration must be obtained at the very first instance of importing the OIDAR service by XYZ co.
Answer 2. Since registration should be taken at the very first instance of importing the OIDAR service therefore yes, the RCM shall be applicable from the very first instance of import.
Answer 3. To reiterate, since the registration is compulsory on the first instance of import therefore the sale of 6Lakh shall be subject to levy of GST.
Answer 4. Since the credit of ITC is not blocked by 17(5) of CGST therefore ITC can be claimed as per 16(1) of CGST. (Read with section 20 of IGST)
Answer 5. If the tax is not deposited on time as per the Time of Supply, which seems to be the case here since registration was not done on the first instance of import, therefore interest is applicable.
Answer 6. Under section 73(5) CGST, bonafide view can be claimed by XYZ co. to deposit tax and interest and this will result in no charge of any penalty. Note that if the government officer discovers this mistake and issues a show cause notice before you depositing the tax and interest on voluntary basis then the bonafide view can be denied and penalty may be levied. (Reply dt.10.08.2020)