As you all aware that the Reverse Charge Mechanism (RCM) under Section 9(4) is postpone till 30.06.2018. However RCM under section 9(3) is in existence. I have provided below the List of expenses on which RCM is applicable and ITC available, except some of the Expenses.

Also we must be understand the importance of Self invoicing under RCM. Since input credit will be available only when matching concept is satisfy.

Detailed Impact analysis of RCM provisions on various expenses debited to Profit and Loss A/c is as follows:-

Sr No
Particulars of Expenses
Applicablity of GST
Rate of GST
ITC Avail-ablity for Front Charge
RCM if From URD
RCM ITC
Remarks
1
Wages
Not Applicable
Employer Employee relationship
2
Salary
Not Applicable
Employer Employee relationship
3
Fuel Expenses for Vehicle
Not Applicable
Petroleum Products not covered under GST
4
Interest Paid
Not Applicable
Except where paid to Creditors for Goods purchased or Services received
5
Depreciation
Not Applicable
6
Bad Debts
Not Applicable
7
Loss Due to theft/Fire
Not Applicable
Corresponding ITC on purchase of material destroyed by fire theft natural calamity free sample etc needs to be reduced.
8
Electricity Expenses
Not Applicable
9
Remuneration to Partners
Not Applicable
As per clarification issued.
10
Profession Tax
Not Applicable
11
Municipal Taxes
Not Applicable
12
ESIC Payments
Not Applicable
13
Discount shown in Bills
Not Applicable
14
Food to Staff Entertainment Expenses
Applicable
Various
No
Yes
No
12% in case of non air-conditioned hotels and 18% in Air conditioned Hotels (Applicable to take away and delivery) Incase of small roadside vendors and unregistered Hotels RCM will be applicable No Input Tax Credit is available on Food and Beverages
15
Conference and Seminar Expenses
Applicable
18%
Partly Yes Refer Remarks
Yes
Partly Yes Refer Remarks
Tax on Rent of the venue i.e. Banquet Will be available as ITC. Tax on Food and Beverages will not be available. It is advisable to have separate bills for rent and Food.
16
Printing and Stationery
Applicable
12% and 18%
Yes
Yes
Yes
Incase of Tax Paid on stationery and Photocopy expenses ITC is available. A diary system with local stationery shop can be maintained and monthly billing can be done for convenience.
17
Travelling Expenses
17a
Train Tickets
Applicable
5% for First Class/III Tier Ac
No
Since railways are currently not updating GSTIN on system the ITC will not be available.
17b
Flight Tickets
Applicable
5% Economy Class
Yes
Yes
Yes
Obtain a copy of Invoice from airline company. All airline companies have started customer updation programms please update your GSTIN with airline companies.
17c
Hotel Accommodation Charges
Applicable
18%/ 28%
Partly Yes Refer Remarks
Yes
Partly Yes Refer Remarks
Tax charged on Accommodation in the same state i.e. In case where the recipient and the hotel are in same state ITC will be available. In case of Hotels outside the state where GST registration is not there than ITC may not be allowed. Tariff up to Rs 999/: 0% Tax. From 1001 to 2499 Rs 12% Tax From 2500 to 7499 Tax@ 18%. And 7500 and above tax rate will be 28%.
17d
Taxi Services such as Tourist vehicle
Applicable
18%
No
Yes
Such Services are in negative list
18
Conveyance
18a
BEST Bus NMDC TMC Bus Etc
Exemption
No
No
No
18b
Auto Rickshaw Metered Taxi Kali Pili
Exemption
No
No
No
18c
Train Pass
Applicable
5% in Case of I Class
No
No
No
Since railways are currently not updating GSTIN on system the ITC will not be available.
18d
Ola/Uber Radio Taxi
Applicable
5%
No
Yes
No
Generally bills are sent on mail which should be properly recorded in books of accounts.
19
Courier Charges
Applicable
18%
Yes
Yes
Yes
20
Repairs to Machinery
Applicable
Various
Yes
Yes
Yes
21
Repairs to Land and Building
Applicable
Various
No Refer Remarks
Yes
No Refer remarks
If repairs are to immovable property than ITC is not available.
22
Insurance Premium Paid
Applicable
18%
Partly Yes Refer Remarks
Yes
Yes
ITC Available except Life and Medical Insurance.
23
Telephone Expenses
Applicable
18%
Yes Refer Remarks
Yes
Yes
ITC available provided connection in name of business entity claiming ITC and GSTIN of Business entity mentioned on Bill.
24
Accounts Writing Charges
Applicable
18%
Yes
Yes
Yes
Generally such part time accountants are unregistered and hence will attract RCM and ITC will be available.
25
Transport Charges Like Tempo etc.
Applicable
Exempt
No
No
No
Transport Charges are exempt from GST except GTA. Hence booking of private tempo or any other carriage for transport of goods where consignment note is not issued will be exempted.
25a
GTA (Compulsory RCM) [Sec 9(3)]
Applicable
5%
NA
Compulsory RCM 5%
Yes
Compulsory reverse charge is applicable on GTA Services @ 5%. Full ITC is available. Charges to the extent of Rs 750 for multiple carriage and Rs 1500/: for exclusive single carriage is exempt and hence no RCM on such services. GTA means a person who provides service in relation to transport of goods by road and issues consignment note by whatever name called.
25b
Hamali Loading Unloading
Applicable
18%
Yes
Yes
Yes
Majority of Hamali Charges are URD and hence RCM Effect will be there. Set off of tax paid on RCM will be available.
25c
Weighment Charges
Applicable
18%
Yes
Yes
Yes
25d
Packing Expenses (Labour)
Applicable
18%
Yes
Yes
Yes
26
Packing Expenses (Material)
Applicable
Various
Yes
Yes
Yes
27
Legal Expenses (Paid to Advocate or Advocate Firm) [Sec 9(3)]
Applicable
18%
NA
Compulsory RCM 18%
Yes
Compulsory reverse charge for payment made to advocate or advocate firm. Full ITC of tax paid on RCM is available
28
Testing Charges
Applicable
18%
Yes
Yes
Yes
29
Labour Charges
Applicable
18%
Yes
Yes
Yes
30
Business Promotion Expenses
Applicable
Various
Yes (Refer Note)
Yes
Yes
In case of free gifts sample etc Input Tax Credit will not be available.
31
Professional Fees (Other than Advocate Fee)
Applicable
Various
Yes
Yes
Yes
32
Internet Charges
Applicable
18%
Yes
Yes
Yes
23
Computer Expenses
Applicable
18%
Yes
Yes
Yes
24
Court fee Paid
Not Applicable
No
No
No
25
ROC Fee
Not Applicable
No
No
No
26
Security Charges
Applicable
18%
Yes
Yes
Yes
27
Site Expenses
Applicable
Various
Yes
Yes
Yes
Site Expenses needs to be categorised properly in different heads. This expenses generally have high quantum of non invoice and URD Purchases and is very important for RCM
if after categorizing site expenses few expenses pertaining to food beverages etc are found than ITC will not be available.
28
Bank Charges
Applicable
18%
Yes
Yes
Yes
29
Bank Guarantee Charges
Applicable
18%
Yes
Yes
Yes
30
Profession Tax
Not Applicable
31
Rent
Applicable
18%
Yes
Yes
Yes
32
Storage and Warehousing
Applicable
18%
Yes
Yes
Yes
33
Office Expenses
Applicable
Various
Yes(Refer Note)
Yes
Yes
Office Expenses needs to be categorized properly in different heads. This expenses generally have high quantum of non invoice and URD Purchases and is very important for RCM if after categorizing site expenses few expenses pertaining to food beverages etc are found than ITC will not be available.
34
Staff Welfare
Applicable
Various
Yes (Refer Note)
Yes
Yes
Staff Welfare needs to be categorized properly in different heads. This expenses generally have high quantum of non invoice and URD Purchases and is very important for RCM if after categorizing staff welfare expenses few expenses pertaining to food beverages etc are found than ITC will not be available.
35
Auditors Fee
Applicable
18%
Yes
Yes
Yes
36
Subscription
Applicable
18%
Yes
Yes
Yes
37
Membership Expenses
Applicable
18%
Yes
Yes
Yes
38
Commission and Brokerage
Applicable
18%
Yes
Yes
Yes
It is a high risk expense chance of URD RCM is more often than not.
39
Liaison Work
Applicable
18%
Yes
Yes
Yes
It is a high risk expense chance of URD RCM is more often than not.
40
Liquidated Damages
Applicable
18%
Yes
Yes
Yes
41
Exhibition Expenses
Applicable
18%
Yes
Yes
Yes
42
Interest paid to Creditors for Taxable Goods/Taxable Service
Applicable
Rate of ser/goods
Yes
Yes
Yes
43
Advertisement
Applicable
18%
Yes
Yes
Yes
44
Motor car Purchase/Rental
Applicable
28% + Cess
No
Yes
No
Motor car is in blocked credit list. Hence no Input Credit available
45
Purchase/Rental of vehicle for Goods Transport
Applicable
28% + Cess
Yes
Yes
Yes
46
Purchase of Computer
Applicable
18%
Yes
Yes
Yes
47
Purchase of Office Equipment
Applicable
Various
Yes
Yes
Yes
48
Purchase of office Furniture
Applicable
Various
Yes Refer Remarks
Yes
Yes Refer Remarks
ITC available on office furniture however if the furniture etc results into immovable property than no ITC is available.
49
Purchase of Cellular Phone
Applicable
12%
Yes
Yes
Yes
50
Purchase of Machinery
Applicable
Various
Yes
Yes
Yes

IMPORTANT NOTES:

Notes: 1) Please remember all ITC is subject to cross matching of Transactions i.e. both the recipient and the supplier should declare such transaction in their respective returns. For proper recording of Transaction in returns updation of GSTIN in Masters of supplier is absolutely necessary.

2) Exemption for URD RCM of Rs 5000/- per day has been provided by way of notification. Utmost care should be taken while taking benefit under this notification as exceeding the limit of Rs 5000/: will trigger liability of full amount including first 5000/-

3) The above mentioned RCM exemption of Rs 5000/- per day is for supplies received from Unregistered person and will not apply to compulsory RCM like GTA Services and Advocate fees.

4) Tax Payable under RCM is not to be collected from the supplier.

5) A single self invoice for month for all unregistered person purchases may be made. This Means Recipient will Create Invoice on behalf of Supplier and showing URD supplier as Seller and Recipient as Buyer.

6) Apart from accounts staff proper care is to be taken by the staff preparing such vouchers. Also ensure that people doing expenses have the company/concern’s GSTIN with them.

7) Please note that utmost care should be taken by the accounts executive while making entries into books of accounts in case the accounts executive is entering any voucher entry pertaining to Expense Purchase capital assets etc.

This sheet is for educational purpose and is prepared with clear understanding that neither the individual writers or the organization will be responsible for any error, omission, commission and result of any action taken by any of the readers or anyone on the basis of this analysis study material.

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One response to “GST: List of Reverse Charge Mechanism (RCM)”

  1. RAMESH KUMAR GUPTA says:

    Sir,
    I have gone through your above referred article on rcm in gst ” List of Reverse charge mechanism” dated 13th april, 2018 and i want to get some points cleared ;
    As i Understand section 9(3) is continued and it is applicable on some specified items like advocate fees, gta services directors fees etc.
    but how items of unregisted purchases/services
    under section 9(4) can attract RCM like brokerage and rent etc. please clearify.
    CA RAMESH KUMAR GUPTA

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