Facing heavy demands and penalties for non-payment of GST Reverse Charge Mechanism (RCM)? Learn why relief is needed as dealers face undue burden despite paying taxes.
Large Number of dealers throughout the country are receiving heavy demand orders along with Interest and Penalty for non-payment of RCM specially for Royalty paid to the Government by Mines owners, Raw cotton purchases by cotton dealers and GTA charges paid by all the dealer etc.
Keep in mind that GST is a tax on sales i.e. a Forward charge Tax , but under this law, tax has to be paid in the name of RCM- Reverse Charge Mechanism on the purchase of some notified goods and services and its input credit is available immediately in most cases.
It is pertinent to mention here with respect to RCM i.e. reverse charge mechanism in case of taxable goods , it was only a technical formality and in most of the cases no additional tax is required to be paid in the name of RCM but only out of the tax paid by the dealer a portion has to be named as RCM and its input credit has to be taken in GST return . In most of the cases the amount of tax paid by the dealer during the year is more than the amount of RCM but the concerned dealer failed to mark the same as his RCM and due to this technical lapse now he is required to pay heavy tax, Interest and penalty and for these Departmental orders are coming.
Read in Hindi: जीएसटी आरसीएम की भारी मांग से सरकार को राहत प्रदान करनी चाहिए
Let’s try to understand this matter as an example here: –
X has paid one crore rupees in cash in the form of tax under GST at the rate of 5% on sales of 20 crores rupees in the financial year 2017-18. In the same year, 1 crore rupees was paid to the state government as royalty and 18 lakh rupees was also to be paid as RCM on this royalty amount @ 18% . If X had paid RCM, he would have got it’s input credit immediately and in this case, X would have to pay Rs 18 lakh as RCM and Rs 82 lakh as Normal tax and in this case also the total tax paid would be 1 crore rupees. Thus, in both the case of paying or not paying RCM, the tax paid by X would have been Rs.1 crore only. Nothing more Nothing Less.
Though he had not deposited RCM separately but his total payment of Tax was 1 crore rupees as normal tax . There is no difference between RCM and normal tax even in GST Challan. This was the only tax to be paid with normal tax, but in addition to this, there is one more formality to show the RCM in GST return and then he had to take it’s input credit which was not done by him. Since there is no difference in amount of payment of tax in both the situation , whether RCM is paid or not, then it is a procedural mistake having no Financial Effect and it can be termed as revenue neutral Mistake.
Now due to this procedural mistake, this dealer will have to pay Rs 18 lakh as RCM along with interest and penalty on it. In most of the cases the interest burden is also almost equal to the amount of RCM and this payment will be an additional burden on this dealer though he has already paid all the taxes collected and due by him on his sales turnover.
In the coming years i.e. years after 2017-18 the same problem is there.
Not showing or marking RCM in such cases is simply a procedural mistake as GST was a new taxation law and a large number of dealers failed to understand the procedural part of it but otherwise, they have paid full tax due on them.
The government should provide relief to these dealers in the form of amnesty or suitable amendment in the law.
– SUDHIR HALAKHNADI
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