Reverse Charge Mechanism (RCM) is a concept under the Goods and Services Tax (GST) regime, which shifts the responsibility of paying tax from the supplier to the recipient of the goods or services. RCM is applicable to both goods and services, and it is intended to bring unregistered businesses into the tax net. Here is an overview of RCM under GST:
1. Applicability of RCM: RCM is applicable when a registered person purchases goods or services from an unregistered supplier, or from a registered supplier who has opted for the Composition Scheme. RCM is also applicable in some other specific situations, as notified by the government from time to time.
2. Calculation of RCM: The tax liability under RCM is calculated in the same way as for a regular transaction, based on the applicable GST rate. The recipient of the goods or services is required to pay the tax on the value of the supply, after deducting any Input Tax Credit (ITC) available.
3. Payment of RCM: The recipient of the goods or services is required to pay the tax liability under RCM, on or before the due date of the GST return. The recipient can claim ITC for the tax paid under RCM, which can be used to offset their output tax liability.
4. Compliance under RCM: The recipient of the goods or services is required to issue a self-invoice for the goods or services received under RCM. The self-invoice should contain all the details of the supplier, the recipient, the goods or services supplied, and the tax payable under RCM.
5.. Exemption from RCM: RCM is not applicable if the value of goods or services received by a registered person from an unregistered supplier does not exceed Rs. 5000 in a day. RCM is also not applicable for specified goods or services, as notified by the government.
It is important to note that RCM is a complex and evolving area of GST, with frequent changes in rules and regulations. Therefore, it is recommended that taxpayers consult with a qualified tax professional or refer to the official GST portal for the latest updates and guidance related to RCM under GST.
The Goods and Services Tax (GST) is a comprehensive indirect tax system that has replaced various indirect taxes at the national level. The GST is levied on the supply of goods and services, and it is collected by the supplier of goods or services at the point of supply. The regular GST and Reverse Charge Mechanism (RCM) under GST differ in the way the tax liability is discharged. Here are the differences between regular GST and RCM under GST:
1. Liability of payment: Under the regular GST, the supplier of goods or services is liable to pay the tax and file the GST returns. In contrast, under RCM, the recipient of goods or services is liable to pay the tax and file the GST returns.
2. Applicability: The regular GST is applicable to all registered suppliers of goods or services, who have a turnover above the threshold limit. RCM is applicable only in specific cases, such as when a registered person purchases goods or services from an unregistered supplier, or from a registered supplier who has opted for the Composition Scheme.
3. Calculation of tax liability: The tax liability under the regular GST is calculated on the value of the goods or services supplied, and it is paid by the supplier of goods or services. In contrast, the tax liability under RCM is calculated on the value of the goods or services received, and it is paid by the recipient of goods or services.
4. Input Tax Credit (ITC): Under the regular GST, the supplier of goods or services can claim ITC for the tax paid on the inputs used for producing the goods or services. In contrast, the recipient of goods or services under RCM can claim ITC for the tax paid under RCM, which can be used to offset their output tax liability.
5. Compliance requirements: The compliance requirements for the regular GST and RCM are different. Under the regular GST, the supplier of goods or services is required to file the GST returns and comply with other compliance requirements. In contrast, the recipient of goods or services under RCM is required to issue a self-invoice for the goods or services received, and pay the tax liability on or before the due date of the GST return.
Understanding the difference between regular GST and RCM under GST is essential for taxpayers to comply with the GST laws and avoid any penalties or interest. Taxpayers should consult with a qualified tax professional or refer to the official GST portal for the latest updates and guidance related to GST and RCM under GST.
Here are some frequently asked questions (FAQs) related to Reverse Charge Mechanism (RCM) under Goods and Services Tax (GST) on goods and services:
1. What is RCM under GST?
RCM under GST is a mechanism where the responsibility of paying tax on a transaction is shifted from the supplier of goods or services to the recipient of the goods or services. RCM is applicable when a registered person purchases goods or services from an unregistered supplier, or from a registered supplier who has opted for the Composition Scheme. RCM is also applicable in some other specific situations, as notified by the government from time to time.
2. What is the difference between regular GST and RCM under GST?
Under regular GST, the supplier of goods or services is responsible for paying the tax and filing the GST returns. In the case of RCM, the recipient of the goods or services is responsible for paying the tax and filing the GST returns. RCM is applicable in certain specific situations, where the supplier is unregistered or has opted for the Composition Scheme.
3. How is the tax liability calculated under RCM?
The tax liability under RCM is calculated in the same way as for a regular transaction, based on the applicable GST rate. The recipient of the goods or services is required to pay the tax on the value of the supply, after deducting any Input Tax Credit (ITC) available.
4. Can a recipient of goods or services claim ITC for tax paid under RCM?
Yes, the recipient of goods or services can claim ITC for the tax paid under RCM, which can be used to offset their output tax liability.
5. How does a recipient of goods or services comply with RCM under GST?
The recipient of the goods or services is required to issue a self-invoice for the goods or services received under RCM. The self-invoice should contain all the details of the supplier, the recipient, the goods or services supplied, and the tax payable under RCM. The recipient is also required to pay the tax liability under RCM on or before the due date of the GST return.
6. What is the exemption limit for RCM under GST?
RCM is not applicable if the value of goods or services received by a registered person from an unregistered supplier does not exceed Rs. 5000 in a day. RCM is also not applicable for specified goods or services, as notified by the government.
It is important for taxpayers to understand the rules and regulations related to RCM under GST to ensure compliance and avoid any penalties or interest. Taxpayers should consult with a qualified tax professional or refer to the official GST portal for the latest updates and guidance related to RCM under GST.
48th GST Council: Hits and Misses
Digital Signature Certificate
