Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge Mechanism, the receiver of goods or service is becomes liable to pay the tax, i.e., the chargeability gets reversed.
Transactions where RCM is applicable
Supply from an unregistered dealer to a registered dealer: If a dealer who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply.
In this case, Tax need to be paid by Supplier directly to the government under self-invoicing.
Note: Reverse Charge Mechanism (in case of supplies made by unregistered persons to registered persons) deferred to 30th Sept 2019.
The Government has notified following categories of services, the tax on intra-State/ inter-state supplies shall be paid by the ECO –
S. No | Description of supply of Service | Supplier of service | Person Liable to Pay GST |
1 | Transportation of passengers by a radio-taxi, motor-cab, maxi-cab and motor cycle | Any person | E-commerce operator |
2 | Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes | Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act | E-commerce operator |
3 | Services by way of house-keeping, such as plumbing, carpentering etc | Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act | E-commerce operator |
Note: If the ECO does not have a physical presence in the taxable territory, then a person representing such ECO for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST.
Supply of certain goods and services specified by CBEC: CBEC has issued a list of goods and a list of services List-of-Goods-and-Services-notified-under-RCM-1.pdf on which reverse charge is applicable.
Time of Supply under Reverse Charge Mechanism
Under RCM, the time of supply shall be the earliest of the following dates:
Under RCM, the time of supply shall be the earliest of the following dates:
Payment of GST under Reverse Charge Mechanism
Any liability arises under RCM need to be paid only in cash, i.e through Cash ledger. ITC cannot be used to pay outward liability under RCM.
Input Tax Credit of GST paid under Reverse Charge Mechanism
ITC can be availed of tax paid under RCM immediately after the payment i.e ITC of RCM can be availed in the same month after making the Cash payment of Tax Under RCM.
Miscellaneous Points under Reverse Charge Mechanism
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How to file RCM booked for an unregistered in the GST site as the 2B were auto populated. We are unable to file RCM? Please advice
Is RCM is applicable on contract labour – if the vendor is not register with GST
As per Section 9(4), the supplier is an unregistered person and the recipient is registered in GST, and latter shall pay GST under RCM.
My query is on Section 9(3), which lists 18 services and seven goods on the supply of which, GST shall be payable by the registered recipient under RCM.
But what about the supplier? Can he be registered on unregistered. E.g. If a person who manufactures silk yarn from raw silk cocoons supplies “silk yarn” to a registered recipient, WHO will pay GST IF:
1. Such a supplier is registered in GST
2. Such a supplier is unregistered in GST.
Thanks!
Reason for RCM .
Reason for RCM levied by government?
Please provide the notification number for List-of-Goods-and-Services-notified-under-RCM.
credit of RCM can be claimed only in the month in which the payment is made. for example liability of RCM for April ’18 will be paid through GSTR-3B on May 20th. and we can take credit only in May month. i.e while filing return for May’18 in June we can take credit in 3B or May month which wil be filed on June 20th please read my article.
Pls do not solicit the clients.
In case export of Service is the only income & no other taxable income and if RCM is paid then cannot be claimed as refund? If yes then there is huge loss to the assessee.