Under the GST Law in general terms, the burden of discharging GST liability lies with the supplier on Forward Charge Mechanism (FCM). But under the Reverse Charge Mechanism the burden of discharging GST liability rests with the Receiver of Goods or Services. When a Recipient of goods or services are liable to discharge GST liability to the Govt. then Registration under GST has to be obtained by such receiver irrespective of Turnover is below the Threshold limit applicable for Registration under GST.
In eligible cases such receiver who is discharging GST under RCM basis may claim benefit of Input Tax Credit (ITC). The supplier of Goods or Services cannot charge GST on the Invoice or claim ITC on the supply of goods or services on which the receiver is discharging GST on reverse charge basis.
RCM why necessary
- As per Provision: Section 9(4) of the CGST Act and 5(4) of the IGST Act When supply is made by an unregistered person to a registered person RCM is necessary. This ensure tax collection preventing tax evasion and promoting compliance.
- Services Rendered through Ecommerce Operator under Section 9(5) of the CGST Act
This majorly applies to the following ecommerce platforms.
- Transportation Services Aggregator: e.g.Ola, Uber, Rapido, Porter, etc.
- Accommodation services aggregator: e.g.Oyo, Make My Trip, Airbnb.
- Housekeeping services aggregator :e.g. Urban Company
Time of Supply under RCM
The time of supply of Goods and services under RCM is generally the earliest of receiving of goods or services /Payment, 30-60 days from date of invoice, or date of RCM entry in books of accounts.
Payment of Tax under RCM
- Discharge of RCM liability under reverse charge shall be paid by debiting the electronic cash ledger. The reverse charge liability cannot be discharged by using input tax credit.
- Advance paid for reverse charge supplies is also liable to procure GST. The person making advance payment has to pay tax on a reverse charge basis.
List of Goods which are eligible for Tax on RCM basis:
| Sr No. | Supply of Goods | Supplier of Goods | Recipient of Goods |
| 1 | Cashew Nuts (unshelled/unpeeled) | Agriculturist | Any registered person |
| 2 | Bidi Leaves (Tendu) | Agriculturist | Any registered person |
| 3 | Tobacco Leaves | Agriculturist | Any registered person |
| 4 | Silk Yarn | Individuals or entities involved in silk yarn production from raw silk | Any registered person |
| 4A | Raw Cotton | Agriculturist | Any registered person |
| 5 | Lottery | State Government, Union Territory, or local authority | Lottery distributor/selling agent |
| 6 | Used vehicles, confiscated goods, old and used goods, waste, and scrap | Central Government, State Government, Union territory, or local authority | Any registered person |
List of Services which are eligible for Tax on RCM basis:
| Sr. No. | Supply of Services | Supplier of Services | Recipient of Services |
| 1 | Taxable services rendered by a person located in a non-taxable territory, received by a person in a taxable territory other than a non-assessee online recipient | Individual or entity in a non-taxable country | Individual or entity in a taxable country |
| 2 | Services provided by a Goods Transport Agency (GTA) for road transportation of goods | Goods Transport Agency: a) Registered factory b) Registered society c) Cooperative society established by law d) Registered under CGST/SGST/UTGST Act e) Body-corporate f) Partnership firm g) Casual taxable person |
Any entity availing transportation services |
| 3 | Legal services provided by an individual advocate or a firm of advocates | Individual advocate or firm of advocates | Any business entity |
| 4 | Services provided by an arbitral tribunal | Arbitral tribunal | Any business entity |
| 5 | Sponsorship services | Any individual or entity offering sponsorship | Any body-corporate or partnership firm |
| 6 | Services provided by government or local authority excluding specific categories | Government or local authority excluding: a) Renting immovable property b) Specific services such as those provided by the Department of Posts, aircraft/vessel services, transport of goods/passengers |
Any business entity |
| 7 | Services provided by a director of a company or a body corporate | Director of a company or a body corporate | Company or body corporate |
| 8 | Services provided by an insurance agent to entities engaged in insurance business | Insurance agent | Entities engaged in insurance business |
| 9 | Services provided by a recovery agent to banking or non-banking financial entities | Recovery agent | Banking company, financial institution, or non-banking company |
| 10 | Transportation services of goods by ship/boat/vessel from a non-taxable territory to the customs station in India | Person in non-taxable territory | Customs station in India |
| 11 | Transfer or granting the use or enjoyment of copyrights related to music, authorship, photography, or artistic work | Copyright holder: Author, composer, photographer, etc. | Publisher, music company, producer |
| 12 | Radio taxi or passenger transport services facilitated by an E-commerce operator | Taxi driver or Rent-a-cab operator | Any individual or entity availing the service |
| 13 | Services provided by members of the Overseeing Committee to the Reserve Bank of India | Members of the Overseeing Committee established by RBI | Reserve Bank of India |
In essence, comprehending the basics of RCM in GST law is paramount for businesses to navigate tax obligations effectively. By delving into its necessity, eligibility criteria, time and tax payment aspects, stakeholders can ensure compliance and mitigate risks associated with GST liabilities. Embracing RCM not only fosters tax transparency but also bolsters the integrity of the GST framework.
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The list seems incomplete. Please check once again with the relevant notification in respect of services because renting of residential property to a registered person is missing.