Concept of RCM is not new in Indirect Tax regime, it is similar to what was there in service tax, but in GST regime supply of goods is also covered under RCM. There is not any provision of partial RCM under GST, 100% need to be paid by receiver of service or Goods.
As per section 9 (3) of GST act The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (List of services under RCM is notified by GST council on meeting held on dt 19th May, 2017. List produce at the end of this article.)
As per section 9 (4) of GST act The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
Conclusion of above reading, one set of tax liability under RCM is where GST council provide list of services for RCM and under section 9(4), if we purchase goods or service from unregistered dealer, then we need to pay tax under RCM and issue self-invoice for receiving supply of Goods as well as service.
Provision applicable to buyer of Goods and Service under RCM-
1) Issue a tax invoice on self
2) Details of Supplier of Goods or Services
3) Details need to be provide in monthly return-Outward as well inwards
4) Calculating of tax and required the same paid through Electronic cash ledger
When we pay under RCM, it’s our obligation to fulfill compliance as if the same supply of service or sale of goods is by us.
When tax should charge under RCM-
In case of RCM, the time of supply is earliest of:
|1||Date of receipt of goods||Date of actual payment or date of accounting of payment, whichever is earliest|
|2||Date of payment, as entered in books of recipient or debited in bank accounts, whichever is earlier|
|3||Date immediately 30 days from the date of issue of invoice (whatever name it be called)||Date immediately 60 days from the date of issue of invoice (whatever name it be called)|
In case of import of services from associated parties, the time of supply should be earliest of:
1) Date of accounting or 2) Date of payment
Now the question raises of accounting treatment and setoff of tax paid under RCM, for that below treatment is required
Accounting Ledger to be create for RCM-
Separate ledger for RCM is required to identify from normal ledger under GST.
Example of Accounting treatment as above:-
Professional service of Rs. 1,00,000/-from XYZ & Co.an unregistered supplier on dt.10/07/2017
Note: Credit of Tax paid under RCM will get only after payment of tax i.e. after filing of GSTR-3.
List of services on which tax is to be paid under Reverse Charge Mechanism