REVERSE CHARGE ON POSTAL SERVICES

Dear Sir,

As per notification no. 13 (CT Rate) dated 28.06.2017 , item 5, RCM is applicable on Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, -

(1) renting of immovable property,

(2) services specified below-

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers.

In this respect, please clarify that in case of 2(i) above whether services given by postal department other than those specified above comes under Reverse charge mechanism or does it falls under Nil rated as specified in notification no 12/2017 (CT Rate) dated 28.06.2017.

Thanks & Regards

CA SHRUTI BHATNAGAR

Hi Shruti,

Good question regarding RCM on postal services by the Department of Posts!

Background:

Notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, Entry 5, covers services supplied by Central/State/UT Governments or local authorities to a business entity under RCM, except certain services like renting immovable property, and specific postal services (speed post, express parcel post, life insurance, agency services).
The excepted postal services (2)(i) listed are not under RCM.

Your query:

For postal services other than speed post, express parcel post, life insurance, and agency services —
Do these other postal services attract RCM or are they Nil rated under Notification No. 12/2017 (CT Rate)?

Clarification:

Services explicitly excluded from RCM under notification 13/2017 means these services are not subject to reverse charge.
For other postal services by Department of Posts, if they are not mentioned as exempt or Nil rated under notification 12/2017, then:
- If the service is taxable and supplied by Government/local authority, RCM would apply as per Notification 13/2017, unless specifically exempted.
However, many postal services (except the excluded ones) are often Nil rated or exempt under Notification 12/2017 or other GST exemptions for government services.

Practical Takeaway:

Check if the specific postal service is Nil rated/exempt under Notification 12/2017 or any other exemption.
If Nil rated/exempt, then no GST and no RCM.
If taxable and not excluded explicitly from RCM, then RCM applies, and the recipient business entity must pay GST.

Suggestion:

For the particular postal service in question, verify classification in Notification 12/2017 or consult GST circulars clarifying government services.
If uncertain, treat excluded services (speed post, express parcel post, life insurance, agency services) as not under RCM, and others as per their GST rate and RCM applicability.