Reversed Charge Mechanism (RCM) under Goods and Services Tax (GST) is a mechanism where the receiver of goods and services is required to pay GST instead of the supplier. This mechanism is applicable in cases where the supplier of goods or services is not registered under GST or if the value of the supply exceeds the threshold limit of Rs. 5000.
Under RCM, the liability to pay GST is shifted from supplier to the recipient of goods or services. This means that the recipient of goods or services is required to pay GST on the value of supply instead of the supplier. This mechanism is applicable to both goods and services and is intended to bring compliance and transparency in the system.
Under RCM, the recipient of goods or services is required to pay GST at the prescribed rate as applicable. The recipient can claim input tax credit on the amount of GST paid on reverse charge. However, the input tax credit can only be claimed if the goods or services are used or intended to be used in the course or furtherance of business.
RCM under GST has brought a significant change in the way businesses operate in India. It has brought in transparency and compliance to the system. However, it also adds an additional burden on the recipient of goods or services. Businesses need to ensure that they are in compliance with the RCM provisions to avoid any penalties or interest.
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