New RCM Time of Supply Rules Effective from 1st November 2024

Summary: Effective November 1, 2024, new amendments to the CGST Act will change the time of supply rules for Reverse Charge Mechanism (RCM) transactions. As outlined in the Finance (No. 2) Act, 2024, registered persons receiving services from unregistered suppliers must issue self-invoices to claim Input Tax Credit (ITC) under RCM; failure to do so will result in the loss of ITC. Additionally, a new Rule 47A has been introduced, specifying that self-invoices must be generated within 30 days of receiving the goods or services. The time of supply for RCM will be determined based on either the payment date, the date of invoice issuance, or the date of receipt, with penalties for delays in invoicing or tax payment.

NEW TIME OF SUPPLY FOR RCM TRANSACTION W.E.F. 01ST NOVEMBER 2024 II SELF INVOICE IS MANDATORY IN CASE OF RCM, ELSE YOU MAY LOOSE RCM ITC

In reference to Section 117 of Finance (No. 2) Act, 2024, the amendment has been made in Section 13 of CGST Act, 2017 which deals with the time of supply for services in reverses charge cases.

In this correspondence, the amendment has been made in Section 31(3)(f) of CGST Act, 2017 which deals with issue of invoices and also cover issue of self- invoices in case of supplies received from unregistered person where recipient is liable to pay taxes under RCM.

Further, a new rule i.e., Rule 47A is also inserted in CGST Rules 2017, stating the time period to generate the self-invoice in respect of S. 31(3)(f).

The changes are applicable w.e.f. 01^st November 2024.

Lets see the relevant provisions related to reverse charge under GST and then discuss the time of supply

RCM is chargeable under two sections: –

1. 9(3) 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.
2. 9(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of 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 such supply of goods or services or both.

Invoice is required to be raised in accordance with: –

S. 31(3) which states a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall within the period as may be prescribed, issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both.

Further, a new rule i.e., Rule 47A is inserted prescribing the time limit for issuing tax invoice in cases where recipient is required to issue invoice which states that notwithstanding anything contained in rule 47, where an invoice referred to in rule 46 is required to be issued under clause (f) of sub-section (3) of section 31 by a registered person, who is liable to pay tax under sub-section (3) or sub-section (4) of section 9, he shall issue the said invoice within a period of thirty days from the date of receipt of the said supply of goods or services, or both, as the case may be.

Now, let’s see the time of supply for RCM transaction:

S. 13(3) Time of supply of services.

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:–

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier, in cases where invoice is required to be issued by the supplier: or

(c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient.

S. 12(3) Time of supply of goods.

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely: –

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

(No amendment has been made in this section as thus as of now this is same as cited earlier)

However, recipient liable to pay tax under RCM in case of goods can take a call and pay the RCM considering, the time of supply for goods earliest of following: –

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier, in cases where invoice is required to be issued by the supplier or the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient.

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

It may be pertinent to note that any delay in issue of self- invoice post 30 days may attract general penalty.

Further delay in payment of taxes beyond time of supply will attract the interest liability @18% p.a. for the period of delay in payment of GST.