Concept of Reverse Charge Mechanism (RCM)

Section 9(3) of the CGST/SGST (UTGST) Act reads ‘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.’

Section 5(3) of the IGST Act reads ‘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.’

Whereas taxable supplies by any unregistered person to a registered person – This is covered under Section 9(4) of the CGST/SGST (UTGST) Act and Section 5(4) of the IGST Act.

Notified Categories of services on which tax will be payable under RCM:

(Notification No. 13/2017- Central Tax (Rate) dated 28/06/2017 & other notifications)

Updated list till 31/03/2020

Sl. No. Category of Supply of Services Supplier
of service
Recipient of Service
(1) (2) (3) (4)
1 Supply of Services by a goods transport agency (GTA) who has not paid central tax at the rate of 6%, in respect of transportation of goods by road to-

(a) any factory registered under or governed by the Factories Act, 1948(63 of 1948);or

(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or

(c) any co-operative society
established by or under any law; or

(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State
Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or

(e) any body corporate established, by or under any law; or

(f) any partnership firm whether registered or not under any law including association of persons; or

(g) any casual taxable person

Provided that nothing contained in this entry shall apply to services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to, –

(a) a Department or Establishment of the Central Government or State Govt. or Union territory; or

(b) local authority; or

(c) Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.

Goods Transport Agency (GTA) (a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or

(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or

(c) any co-operative society
established by or under any law; or

(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or

(e) any body corporate established, by or under any law; or

(f) any partnership firm whether registered or not under any law including association of persons; or

(g) any casual taxable person; located in the taxable territory.

2 Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of
advocates, by way of legal services, to a business entity
An individual advocate including a senior advocate or firm of advocates. Any business entity located in the taxable territory.
3 Services supplied by an arbitral tribunal to a business entity An arbitral tribunal Any business entity located in the taxable territory
4 Services provided by way of sponsorship to any body corporate or partnership firm Any person Any body corporate or partnership firm located in the taxable territory
5 Services supplied by the Central Government, State Government, Union territory or local authority to
a business entity excluding, –
(1) renting of immovable property, and(2) services specified below-(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;(ii) services in relation to an
aircraft or a vessel, inside or outside the precincts of a port or an airport;(iii) transport of goods or passengers.
Central Government, State
Government, Union territory or local authority
Any business entity located in the taxable territory
5A Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017). Central Government, State
Government, Union territory or local authority
Any person registered under the Central Goods and Services Tax Act, 2017.”
“5B Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter Any person Promoter
5C Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter Any person Promoter
6 Services supplied by a director of a company or a body corporate to the said company or the body corporate A director of a company or a body corporate The company or a body corporate located in the taxable territory
7 Services supplied by an insurance agent to any person carrying on insurance business. An insurance agent Any person carrying on insurance business, located in the taxable territory
8 Services supplied by a recovery agent to a banking company or a financial institution or a non banking
financial company
A recovery agent A banking company or a financial institution or a non-banking financial company, located in the taxable territory
9 Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

w.e.f. 01.10.2019

Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957
relating to original dramatic, musical or artistic works to a
music company, producer or the like

Author or music composer,
photograph her, artist, or the likeMusic composer,
photographer, artist, or the like
Publisher, music company, producer or the like, located in the taxable territory

 

 

Music company,
producer or the like,
located in the taxable
territory. ”;

9A w.e.f. 01.10.2019
Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957
relating to original literary works to a publisher.
Author Publisher located in
the taxable territory.
Provided that nothing contained in this entry shall apply where-(i) the author has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017), and filed a declaration, within the time limit prescribed with the jurisdictional CGST or SGST commissioner, as the
case may be, that he exercises the option to pay central tax on the service specified in column (2), under forward charge in accordance with Section 9 (1) of the Central Goods and Service Tax Act, 2017 under forward charge, and to comply with all the provisions of Central
Goods and Service Tax Act, 2017 (12 of
2017) as they apply to a person liable for paying the tax in relation to the supply of any goods or services or both and that he shall not withdraw the said option within a period of 1 year from the date of exercising such option;-(ii) the author makes
a declaration, as prescribed on the invoice issued by him in Form GST Inv-I to the publisher. ”;
10 Supply of services by the members of Overseeing Committee to Reserve Bank of India Members of Overseeing
Committee constituted by
the Reserve Bank of India
Reserve Bank of India.
11 Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs). Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm. A banking company or a non-banking financial company, located in the taxable territory
12 Services provided by business facilitator (BF) to a banking company Business facilitator (BF) A banking company,
located in the taxable territory
13 Services provided by an agent of business correspondent (BC) to business correspondent (BC). An agent of business
correspondent (BC)
A business correspondent, located in the taxable territory
14 Security services (services provided by way of supply of security personnel) provided to a registered person:

Provided that nothing contained in this entry shall apply to, –

(i) (a) a Department or Establishment of the Central Govt. or State Government or Union territory; or

(b) local authority; or

(c) Governmental agencies;

which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 of the Act and not for making a taxable supply of goods or services; or

(ii) a registered person paying tax under section 10 of the said Act.

Any person other than a body corporate A registered person,
located in the taxable territory
15 w.e.f. 01.10.2019
Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate.
Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent. to the service recipient Any body corporate located in the taxable
territory.
16 w.e.f. 01.10.2019
Services of lending of securities under Securities Lending Scheme, 1997 (“Scheme”) of Securities and Exchange Board of India (“SEBI”), as amended.
Lender i.e. a person
who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the Scheme of SEBI
Borrower i.e. a person who borrows the securities under the Scheme through an approved
intermediary of SEBI.

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9 Comments

    1. visvikas08 says:

      RBI constitute oversight committee and member who are nominated for this committee give services to RBI. In that case RBI has to pay GST under RCM on the services received from member of oversight committee.

    1. visvikas08 says:

      In case of builder, They have to procure Goods/services from registered dealer to the tune of 80% of total purchases for a particular project. Any shortage in 80%, builder has to pay GST under RCM, in that case Builder has to pay proportionately under RCM on all the inwards supply he made. If that includes manpower supply from unregistered dealer then yes, RCM is applicable.
      If need more clarification please call me on Mob: 8879136379

    1. CA. Saket Agarwal says:

      Hi, this is CA. Saket Agarwal, yes GST is applicable on the import of services as well. IGST is payable on the import of services.

  1. SMROSHAN says:

    so sir as per you if i purchase from uregistered person and sell it with tax @ 18% i.e. hardware item will it not come under RCM payable

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