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 |
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2 |
Salary |
Not Applicable |
Employer Employee relationship |
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3 |
Fuel Expenses for Vehicle |
Not Applicable |
Petroleum Products not covered under GST |
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4 |
Interest Paid |
Not Applicable |
Except where paid to Creditors for Goods purchased or Services received |
||||
5 |
Depreciation |
Not Applicable |
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6 |
Bad Debts |
Not Applicable |
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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. |
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8 |
Electricity Expenses |
Not Applicable |
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9 |
Remuneration to Partners |
Not Applicable |
As per clarification issued. |
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10 |
Profession Tax |
Not Applicable |
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11 |
Municipal Taxes |
Not Applicable |
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12 |
ESIC Payments |
Not Applicable |
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13 |
Discount shown in Bills |
Not Applicable |
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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 |
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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. |
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28 |
Bank Charges |
Applicable |
18% |
Yes |
Yes |
Yes |
|
29 |
Bank Guarantee Charges |
Applicable |
18% |
Yes |
Yes |
Yes |
|
30 |
Profession Tax |
Not Applicable |
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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.
Author Bio
Sir,
Is commission paid to unregistered person by a company then Reverse charge Mechanism applicable or not applicable for in respect of company?
Sir, Can I know that RCM Applicable against Design Work and Discussion related to Design work and Inspo, Meeting Buyer Shop done by a person which is citizen of Hong Kong. He was Generated a Bill in Foreign Currency. Please clarify.
Rajendra Kumar
SIR
WE HAVE TAKEN HIRED SERVICE OF VEHICLE (FOR STAFF ) BUT THEY ARE SINGLE VEHICLE OWNER , WE SHULD APPLICABLE RCM ON THEM .
Can I have purchased a bi product(means not natural products) in RCM.
WHICH LEDGER SHOULD CREAT FOR ACCOUNTING RCM ? PLEASE SUGGEST
Whether acturial service covered under RCM from 1-7-2017 to 31-3-2018 ?
Please confirm,…..
Sir,
We have taken the advisory service from a PhD Dr towards scientific matters of INR 1 Lac PM.
Is its attract to the GST under RCM..? If yes please share your explanation with Rule of GST.
Please reply on priority .
good research on RCM but not mentioned regarding company secretary professional fee paid to unregd person or company, please in list
I had purchased agriculture product (090831 ) from URP in the period of JULY 2017 – 12 Oct 2017,i am not filled RCM for this URP purchase but i filed tax (GSTR3B) based on selling time. Fy 17-18 Annual retune already finished. What I will do for RCM? If I paid RCM, ITC available in this case ?
My client is GTA. He is not liable to pay tax as RCM to pay by recipient of our service. but what if my client (GTA) purchase goods (Spare Parts of truck) from URD? whether GTA himself is liable to pay tax on that urd purchase? plz guide.
reverse charges in 2017 list of gov contractor and change for first time reverse charges
I received service of trucks ( transport ) for my goods, and Freight company is registered into GST , are applicable RCM on me .
As per my knowledge as sec 9(4) is postponed and as per sec 9(3) requires RCM on some specified supplies why should we create RCM on printing & stationery, food to staff, Hamali Expenses etc?? Please don’t shake our confidence with such articles.
only GTA and legal charges are covered in RCM other things are postponed pls verify and confirm
As per latest whether RCM is to paid on rental expenses as the owner is unregistered person and can take the ITC and on Commission paid to the broker who is a unregistered person kindly clarify sir
i am in hotel industry kindly clear me that we are purchasing food items from unregistered dealers and also other items as well . please tell me how can i know the Rcm charging on the above food products as well…please help me in this asap….thanks
notification no 22/2018-Central Tax (Rate) ,dt. 06-08-2018, Now The RCm U/s 9(4) suspended till 30th day of September, 2019.
Dear sir what is rcm how understand thise topic
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