QUESTION

 As per Notification no. 03/2019 Central Tax Rate, RCM is payable if Inward supply is less than 80% from registered dealer, whether interest paid to partners should be considered as URP inward supply and is RCM payable on it?

ANSWER

Facts of the case: Interest paid to partners to be considered as URP inward supply or not.

Law Applicable: SECTION 7 OF CGST ACT
(1) For the purposes of this Act, the expression 'supply' includes''
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for consideration whether or not in the course or furtherance of business; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;

Interpretation: In view of Section 7, interest on capital paid to partners is not considered as supply. Further interest on loan paid to partner is exempt as per Notification no. 12/2017 Central Tax (Rate).

Conclusion: As interest paid to partner is not considered as supply therefore question of RCM liability does not arise.(Reply dt.25-02-2020)