Applicability of Reverse Charge (RCM) on inward goods/service/Capital Goods received from Unregistered person
Summary: The Indian tax structure for real estate transactions underwent significant changes effective April 1, 2019, following notifications issued by the CBIC on March 29, 2019, post-GST implementation in July 2017. A key aspect of these revisions is the applicability of the Reverse Charge Mechanism (RCM) for procurement of inputs, input services, and capital goods from unregistered dealers. This provision applies to ongoing projects as of April 1, 2019, where developers opted for new concessional rates (1% or 5%), and to all projects commenced from April 1, 2019. RCM is payable monthly on capital goods and cement procured from unregistered dealers at their respective applicable rates (28% for cement). For other inputs and input services from unregistered dealers, RCM at 18% applies only to the portion exceeding 20% of total inputs/services procured from registered persons. While RCM for capital goods and cement is calculated and paid monthly, the RCM for other procurements is computed annually on a project-wise basis and due by the June return deadline following the financial year end. For FY 2024-25, this annual RCM payment is due by the June 2025 deadline. Specific project data must be entered independently, with pre-formulated cells requiring no user input.
Background: After Implementation of GST in July 2017, CBIC announced major changes in tax structure in case of Real Estate Transaction by issuing various notifications on 29.03.2019, and these notifications are effective from 01.04.2019.
One of the important aspects of these Notifications is payment of GST under Reverse charge, incase of procurement of Input/ Input services and Capital Goods from unregistered Parties. This provision is applicable to
1) Ongoing Project as on 01.04.2019, for which developers opted for new concessional rates (1% or 5%).
2) Project commenced from 01.04.2019.
As per the Notification, in case of
1) Procurement of Capital Goods from URD:- RCM Shall be payable in the month in which goods are received / Procuredat the rate applicable on similar goods.
2) Procurement of Cement from URD :- RCM Shall be payable in the month in which goods are received at the rate 28%.
3) Procurement of any other Inputs or input services, other that Cement/Capital Goods/ premium for Development Right, Long term lease premium, FSI from URD:-Such Input / input services are permissible upto 20% inputs / input services procured from Registered person, and incase where it exceeds 20% then RCM shall be payable @18% on the portion exceeding 20%.
It is important to note that, in case of RCM payable for Sr No 1 and 2 shall be payable on monthly basis, whereas for Sr No 3 above (Other Procurements) same is computed on an annual basis (Project wise) and GST shall be paid by the due date for the month of June from the end of Financial year.
Therefore For the F.Y. 2024-25, the above provision is applicable and GST Calculated for Sr No 03 shall be computed and paid by due date for the month of June 2025. for the reference and better understanding, macros enabled template is designed and attached herewith.
Note that,
1) Details are to be entered for each project, independently and on different sheets. (do not provide the consolidated amount for all projects in one sheet).
2) Some of the cells are highlighted in various colors and formulated with conditions. users need not enter anything in it.
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Disclaimer: The information in this document is for educational purposes only and should not be construed as legal, accounting, or tax advice. Users are advised to refer to the relevant provisions of the applicable laws, notifications, and circulars before taking any action. Exercise individual discretion and analytical judgment before implementing any suggestions.
The content reflects the legal position as on the date of preparation. For any queries, clarification, or issues related to this template, feel free to write to santoshvd04@gmail.com.
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