Background: XYZ Jewellers, a well-known jewellery brand, is preparing to showcase its collection at an upcoming jewellery expo in Mumbai. Since the company does not have a permanent presence in Mumbai, they will set up a temporary stall for the event. The goods will be transported from their registered business location in Jaipur to the expo venue. The management seeks clarity on two key GST implications:
- The requirement of Casual Taxable Person (CTP) registration.
- The applicability of Reverse Charge Mechanism (RCM) on transportation services.
Issue 1: Casual Taxable Person (CTP) Registration Requirement
Legal Provisions:
- As per Section 24 of the CGST Act, 2017, businesses making occasional taxable supplies in a state where they do not have a fixed place of business are classified as Casual Taxable Persons (CTP).
- CTP registration is mandatory and must be obtained at least five days before commencing business in the state where the expo is held.
- A CTP is required to deposit advance tax based on estimated GST liability for the period of registration.
Analysis: XYZ Jewellers does not have a registered place of business in Maharashtra. Therefore, they must register as a CTP before selling at the expo. Without CTP registration, the company would be non-compliant with GST laws, leading to potential penalties and legal issues.
Consequences of Non-Compliance: Failure to obtain CTP registration can lead to penalties under Section 122 of the CGST Act, 2017, which may include a penalty of ₹10,000 or an amount equivalent to the tax evaded, whichever is higher. Additionally, non-compliance can lead to legal issues and reputational damage.
Conclusion: XYZ Jewellers must obtain CTP registration in Maharashtra before participating in the expo to ensure compliance with GST regulations.
Issue 2: Applicability of Reverse Charge Mechanism (RCM) on Goods Transportation to Expo
Legal Provisions:
- According to Notification No. 13/2017-Central Tax (Rate), under GST, the Reverse Charge Mechanism (RCM) applies to services provided by Goods Transport Agencies (GTA).
- Under RCM, the recipient of services (XYZ Jewellers) is liable to pay GST instead of the supplier (GTA), provided the GTA has not opted to pay GST under the forward charge mechanism.
- By correctly discharging RCM, XYZ Jewellers can avail Input Tax Credit (ITC) on the GST paid, which can be used to offset their output tax liability, thus reducing their overall tax burden.
Analysis:
If XYZ Jewellers hires a GTA to transport jewellery from Jaipur to Mumbai, they must determine whether the GTA has opted for forward charge. XYZ Jewellers should request a declaration from the GTA or verify the information on the GTA’s invoice.
- If the GTA has not opted for forward charge: XYZ Jewellers must pay GST under RCM.
- If the GTA has opted for forward charge: The transporter will levy GST on the invoice, and XYZ Jewellers will pay it as part of the service cost, without any RCM liability.
Consequences of Non-Compliance: Failure to comply with RCM provisions can lead to penalties under Section 122 of the CGST Act, 2017, similar to those for non-registration.
Conclusion:
- The entity making the payment to the transporter will be responsible for RCM compliance.
- If the transportation cost is booked and paid before obtaining CTP registration, Jaipur GSTIN must discharge GST under RCM.
- If transportation is arranged after obtaining CTP registration and the invoice is addressed to the CTP, Maharashtra GSTIN will be liable for RCM.
Action Plan for XYZ Jewellers:
- Obtain CTP registration at least five days before the event to ensure compliance with GST laws.
- Estimate GST liability in advance and deposit the required amount as per CTP provisions.
- Verify the tax mechanism adopted by the GTA (forward charge vs. RCM applicability) before making payments.
- Ensure that RCM compliance is handled by the GST registration (Jaipur or CTP in Maharashtra) that makes the payment for transportation services.
- Maintain proper documentation and invoicing for GST compliance and Input Tax Credit claims.
