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RCM or REVERSE CHARGE MECHANISM UNDER GST

GST REVERSE CHARGE MECHANISM

Cases where liability to pay tax to the government is on Supply Receiver and not Supplier

RCM – I
Section 9(3)
� A LIST of Goods/Services has been notified by the Government.
� If the transaction falls in this list,applicability of RCM arises (no matter the services are received from a registered or unregistered person)

RCM – II
Section 9(4)

Where the purchases of goods/ services are made by a registered person from an unregistered person,the applicability of RCM u/s 9(4) arises.

RELIEF  BY GOVERNMENT:

� Where the purchases of goods/ services are made by a registered person from an unregistered person,the applicability of RCM u/s 9(4) arises.
Where Aggregate Value of Supplies in a day is less than Rs.5000/- then GST on such supply will not be required to be paid under RCM.

Furthermore,RCM u/s 9(4) will not apply where goods are  purchased from Composite Dealer as he is a Registered person under GST.

NOTIFIED SUPPLIES OF GOODS UNDER RCM

SL
No.
Description of
supply of Goods
Supplier of goods Recipient of
supply
1 Cashew nuts, not
shelled or peeled
Agriculturist Any registered
person
2 Bidi wrapper
leaves (tendu)
Agriculturist Any registered
person
3 Tobacco leaves Agriculturist Any registered
person
4 Silk yarn Any person who
manufactures silk yarn
from raw silk or silk worm
cocoons for supply of silk
yarn
Any registered
person
5 Supply of lottery State Government, Union
Territory or any local
authority
Lottery
distributor or
selling agent

 

NOTIFIED SUPPLIES OF SERVICES UNDER RCM

SL NO. Description of supply of SERVICE Supplier of
Service
Recipient of Service
1 Transport of Goods by
Road services.
GTA Person Registered
under GST, a body
corporate or a
Partnership Firm
(amongst others)
2 Legal Services by
Advocate
An advocate
or firm of
advocates.
Any business entity
located in the taxable
territory.
3 Services supplied by an
arbitral tribunal.
An arbitral
tribunal.
Any business entity
located in the taxable
territory.
4 Sponsorship Services Any person  A body-corporate or
a partnership firm
located in the taxable
territory.
5 Services BY Government
(Central, State, UT, Local
Authority) Except
following:a. Renting of immovable
property
b. Transport of goods or
passenger.
c. Certain Services by dept.
of post.
d. Services in relation to an
aircraft or vessel……
Central
Government,
State
Government,
Union
Territory
Or
Local
authority
Any business entity
located in the taxable
territory.
6 Services by Director A director of a
company or a
body
corporate
The company or a body
corporate located in the
taxable territory.
7 Insurance Services  An insurance
agent
Any person carrying on
insurance business,
located in the taxable
territory.
8 Recovery Agent Services A recovery
agent
Banking Company or a
Financial Institution or
a NBFC located in
taxable territory.
9 Services by an author, music
composer, photographer,
artist or the like by way of
transfer or permitting the use of
a copyright relating to original
literary, dramatic, musical or
artistic works to a publisher,music company,producer or the like
An Author or
a music
composer, or a
photographer,
or an artist,
or the like.
Publisher, music
company, producer or
the like, located in the
taxable territory.

IMPORTANT FACTS

1.Registration mandatory in case tax is required to be paid under RCM?

� Yes, for example, even when supplying exempted goods / services,registration is required in case RCM u/s. 9(3) is applicable .

2. Whether a Composite dealer also needs to pay tax under RCM?

� Yes, under both the sections of RCM, the Composite Dealer is liable to pay tax at the regular rate of goods/ services received.
.
3. Whether the liability under RCM can be paid through ITC?

� No, ITC cannot be used to pay tax liability under RCM which means that the liability of tax under RCM can only be paid through
Cash/Cheque.

4. When does the liability to pay tax arise?

� For Goods :

Earlier of (a) receipt of goods, (b) payment made to vendor or (c) 31st day from purchase bill date.

�For Services :

Earlier of (a) payment made to vendor or (b) 61st day from purchase bill date.

5. Whether ITC is available under RCM?

� The service recipient can avail Input Tax credit on the Tax amount that is paid under reverse charge on goods and services, the only
condition is that the goods and services are used or will be used for business or furtherance of business.

 

ABOUT GAGAN KEDIA

The blog has been written under the guidance of GST tax expert CA Gagan Kedia.

Firstly Gagan is a commerce graduate, a Chartered Accountant and a Company Secretary by qualification.Moreover he has dedicated over past 1 year of his life in GST research, working closely with various authorities.

Furthermore Gagan has keen interest in training and has also conducted various training workshops with big corporate houses in the area of Taxation & Accounting.

Additionally,he is also a selected faculty member of the Indirect Tax Committee of ICAI for GST Trainings.He is an active member of the privileged Kolkata Study Group of Indirect Tax Committee of ICAI.This committee deals in – GST Research, Representations to Governments, Publication of Books, etc.He is the Managing Partner of the Firm M/s. MRG KEDIA & Co., looking after Transaction Advisory & Litigations in the field of Service Tax & GST for various clients.

You can reach Gagan at cagkedia@gmail.com

 ABOUT ZEROINFY

Furthermore, all recent informations and changes relating to GST  is also available on Zeroinfy.com.

Additionally to know about the basic concepts of GST,click here.

Correspondingly Information relating gst rates on goods and services,click here.

For this reason,you can visit our site zeroinfy.com for more updates….

Zeroinfy.com is India’s Largest Online Platform for Exam Preparation, with over 200+ HD quality video courses, 25+ best Professors.Above all, presently it covers exams like CA, CS, CMA, UPSC CSE, IIT-JEE.

 

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