Meaning of RCM under GST: As per 2 (98) “Reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017.
Applicability and Registration for Taxpayers who Pay Reverse Charge : All persons who are required to pay tax under reverse charge have to register for GST irrespective of the threshold Threshold:- turnover in a financial year exceeds Rs 20lakhs (Rs 10 lakhs for North eastern states).
Situations under where reverse charge applied:
1. Unregistered dealer selling to a registered dealer (In such cases, the registered dealer is required to pay GST on RCM basis for such supply.)
2. Services through an e-commerce operator
3. CBEC has notified a list of 12 services on which GST paid by the recipient on 100% reverse charge basis: the Services are
(a) Non-resident service provide.
(b) Goods Transport Agencies
(c) Legal service by an Advocate/ Firm of Advocates
(d) Arbitral Tribunal
(e) Sponsorship Services
(f) Specified Services provided by Govt. or Local Authority to Business entity
(g) Services of a director to a company
(h) Insurance agent
(i) Recovery Agent of Bank/ FI / NBFC
(j) Transportation Services on Import
(k) Permitting use of Copyright
(l) Radio Taxi services to E-commerce aggregator (eg: Ola, Uber, etc.)
Time of Supply for Goods Under Reverse Charge: In case of reverse charge, the time of supply shall be the earliest of the following dates-:
(a) The date of receipt of goods or
(b) The date of payment or
(c) The date immediately after 30 days from the date of issue of invoice by the supplier (60 days for services)
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply will be the date of entry in the books of account of the recipient Eg:
• Date of receipt of goods 2nd July 2017
• Date of payment 7th July 2017
• Date of invoice 1stAugust 2017
• Date of entry in books of receiver 18th July 2017
• Time of supply of goods 2nd July 2017
Invoicing rules: Every service recipient, who is paying tax on the basis of reverse charge, has to mention fact in his GST invoice that is being issued. A registered person who is liable to pay tax under reverse charge ,respect of goods or services received by him from the supplier who is not registered.
Input Tax Credit under RCM:
(a) The service recipient can avail Input Tax credit on the Tax amount that fs paid under reverse charge on goods and services.
(b) The condition is that the goods and services are used or will be used for business.
(c) ITC in RCM cannot be used to pay output tax, it means payment mode only in cash.
Composition Scheme under GST : Taxpayers with the aggregate turnover of Rs. 75 lakhs ( for special category states turnover upto Rs.50 Lakhs) in a financial year are eligible to pay tax under composition scheme. But, taxpayers paying tax on the basis of reverse charge under GST are not eligible for composition scheme.
GST Compensation Cess : GST Compensation Cess will also be applicable on reverse charge. GST Compensation Cess will be levied and collected at a rate which will be notified later. This will apply , in on all supplies of goods and services, including imports and reverse charge supplies.
CA VISHAL GALA Mob – 981951 3758
MSWA’s Housing Societies Review – August 2017