Reverse Charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

There are two type of reverse charge scenarios provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/SGST (UTGST) Act and section 5 (3) of the IGST Act.

As per CGST Amendment Act 2018 w.e.f. 01 Feb 2019 , Sec 9(4) has been amended to refer only to specified goods and services as notified by the Government and not all supplies. But the list is yet to be notified, after which this provision Sec 9(4) shall apply to all such supplies notified

Reverse Charge Mechanism (RCM)

There are a number of notifications issued , time to time ,by the Government for adding specified goods, services and category of supplier to be covered under Reverse Charge mechanism (RCM).

A consolidated updated list indicating nature of supply ( goods / services ), category of the supplier and the recipient covered under RCM  is as indicated below :-

Sl. Nature of Supply ( Goods / Services) Supplier of Goods/ Services Recipient of Goods / Services
1 Purchase of cashew nuts, not shelled or peeled Agriculturist Any registered person
2 Purchase of bidi wrapper leaves (tendu) Agriculturist Any registered person
3 Purchase of tobacco leaves Agriculturist Any registered person
4 Purchase of silk yarn Any person who manufactures silk yarn Any registered person
5 Purchase of raw cotton Agriculturist Any registered person
6 Purchase of lottery ticket State Government Selling agent
7 Purchase of used vehicles, seized and confiscated goods, old and used goods,
waste and scrap
Central Government, State Government, Union territory or a local authority Any registered person
8 Purchase of priority Sector Lending Certificate Banks / Financial Institution Any registered person
9. Purchase of Cement Any person Promoter/ Builder
10

 

 

 

 

 

Services of Goods Travel Agency (GTA) Goods Transport Agency (GTA) Any factory, society, co-operative society, registered person, body corporate, partnership firm, casual taxable person located in the taxable territory
10(a) RCM on GTA services not applicable if  GTA  opts  to pay the tax on forwards charge @ 12%
11 Legal Services of the  advocate An individual advocate including a senior advocate or firm of advocates Any business entity located in the taxable territory
12 Services of  an arbitral tribunal to a business entity An arbitral tribunal Any business entity located in the taxable territory
13 Sponsorship services Any person Anybody corporate or partnership firm located in the taxable territory
14 Director’s services ( except remuneration) A director of a company or a body corporate The company or a body corporate located in the taxable territory
15 Services of insurance Agent An insurance agent Any person carrying on insurance
business, located in the taxable
territory
16 Services of Recovery Agent A recovery agent A banking company or a financial institution or a non-banking financial company, located in the taxable territory
17 Services of overseas Committee Members of Overseeing Committee constituted by the Reserve Bank of India Reserve Bank of India.
18  Services of  an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under section Author or music composer, photograph her, artist, or the like Publisher, music company, producer or the like, located in
the taxable territory
18(a)    Author can exercises the option to pay GST  on the service relating to original literary works under forward    charge w.e.f 01.10.2019
19 Services  by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project . Any person Promoter
20 Long term lease of land (30 years or more)  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 Any person Promoter
21 Services of an  individual Direct Selling Agents (DSAs) 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
22 Services of a  business facilitator (BF) Business facilitator (BF) A banking company,
located in the taxable territory
23 Services of business correspondent (BC) An agent of business
correspondent (BC)
A business correspondent, located in the taxable territory
24 Security services Any person other than a body corporate A registered person,
located in the taxable territory
25 w.e.f. 01.10.2019
Services of hiring of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration paid by  service recipient,
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.
26 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.

In addition to the above , following expenditure /services are also covered under RCM :-

(a) 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.

(b) 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).

The Author can be approached at [email protected]

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89 Comments

  1. Geetha says:

    Sir,

    I have Provided cloth stitching service to registered vendor.

    Our registered vendor has informed raise the invoice in RCM.

    Hence, kindly advise the RCM is applicable for cloth stitching service.

    1. Sadik says:

      Dear,
      your nature of job falls under Services category as per GST ACT, Which attracts 5% GST on such services to service recipient. As your service recipient asked you to raise RCM Invoice, it means, you are not a Tax Registered Person (I believe your total service annual revenues does not more than 20 Lacs in any preceding financial year and not expected to achieve 20 Lacs in any coming financial years , and not providing Interstate services). Hence, you can raise RCM invoice with 5% GST rate which is eligible for Input Tax Credit to your Service Recipient(if Service Recipient is a Supplier and not an end user of your services)

      However, if you are a Tax registered Person or opt to voluntary registration or become eligible person under compulsory registration( where you have exceeded or projected to be exceeding 20 lacs annual turnover or provided intestate services) then, you need to raise Tax Invoice( no RCM Invoice) with 5% GST against your services to the Recipients.

  2. mayank says:

    I m a registered GST in Service provider (composition). I want to ask if my business of making projects (like website to explain about a product) on any theme on the computer for a company and sell it to them. Does my work fall under attracting RCM or not? Plz reply, I am very much confused.

    1. sadik says:

      Dear,
      As you are registered under Composition Scheme as a Registered Service Provider (Whose service annual turnover up to 50 lacs ) in Web Designing and related services, the following applies to your business,
      1. you need to raise Bill of Supply only ( Not a Tax Invoice) without applying any GST on your services and further highlighting the Text on your each Bill of Supply with ” Composition Taxable Person, not eligible to collect Tax on Supplies ”
      2. under Composition scheme, you need to file quarterly returns CMP-08 on or before 18th day of immediate month preceding the end of Quarter by paying fixed 6% GST on your total Outward Supplies for period of Return filing.
      3. you are not allowed to Interstate supply of services.
      4. You are not entitled to any Input Tax Credit on your Purchases.
      5. As you are a registered person under composition scheme, hence no need to raise any RCM invoice to your Service Recipient, because your service recipient is not paying any tax to you hence they do not require to claim Input Tax Credit.
      6. RCM applies those services which notified By GST Act, in your case, you will be charged under RCM if you purchase goods or receive any services to fulfill or complete your project or web designing or any related services from a Unregistered Person.
      7. I believe, in your business may need or have a option to buy or receive any product or service from a unregistered person.

  3. Monika Gupta says:

    sir,
    A trust or aop is hiring a taxi for business purpose and service provider not charging gst in bill. is this service covered in rcm?

  4. HARDIK SHRIMAL says:

    I am a GST registered person say ABC Corporation having a Dealership of petrol Pump, Our Supplier is X Ltd. Now X Ltd supply the petrol & diesel to ABC Corporation through a Y Person having a single truck, X Ltd pays the freight charges for the same to ABC Corporation after deducting tds under section 194C which is recorded as direct income in ABC Corporation’s books of account and ABC Corporation pays freight charges to Y person & the same is claimed as direct expense.
    Now the question is, are we liable to pay GST under RCM for the freight charges paid to Y Person ?

  5. shaikh Mehmud says:

    Dear madam,

    We are purchasing used vehicle, scrap etc. from central/state govt, military or others. they asks for tax under RCM, how invoice bill should be prepared? what are tax rate ? how tax to be paid?
    my whats app no. is 9427459090

  6. Qazi umar says:

    Dear mam,
    Ist ty vv much for sharing the knowledge n clearing the doubts.
    U in a comment above said that RC on purchase from unregistered supplier is not applicable, does that mean that the provisions of section 9(4) and 5(4) of the respective acts are not applicable anymore.

  7. R. K. Makharia says:

    Sir, The List of Notified – Specified Goods & Services covered under RCM, asDisclosed by you, is not Visible Clearly, & with all Columns. Pl. Help Taxpayers. Thanks. R .K. Makharia. .

  8. Samir says:

    Sir I am a civil contractor registered under GST.
    1) I am purchasing sand & Stone chips from unregistered dealers.
    2) I am paying to unregistered labour contractors.
    Should I pay RCM in any of the above case?

  9. K.P.R.Jewellery says:

    Madam, I am a gold jewellery manufacturer. I give raw gold to the goldsmiths , get ornaments done and pay wages and wastage to them. None of the goldsmiths is registered. Am I liable to pay RCM on wages? Pl clarify.

  10. riddhi esai says:

    mam i want to know that weather rcm applicable for partnership firm or not? companies are liable to pay rcm but for partnership firm i want to know.

  11. Reeja suresh says:

    Dear Ma’am, The RCM is applicable for rent provided by unregistered person to company during perion june 2017-october 2017. monthly rent is 80000Rs. So daily amount will be only Rs 2666. paid as sum of 80000 on every month, It would be grateful if you can help on this

  12. YASH JAIN says:

    Superb explained , thanks for this.

    I have a query regards a company registred under GST purchased material like Wheat,rice , bajra, pulses etc from unregistered person , whether co liable to pay gst on these good or nt

  13. Amit Kumar Singh says:

    We have taken zoom subscription, every month we pay for renewal . Want to know is there any RCM applicability.Also please suggest is there any TDS applicablity.
    Payment done from credit card.

  14. Bhavesh Saraiya says:

    A private limited company getting job charge (textile industry) from unregistered person.

    GST under RCM applicable?

    It is difficult to interpret & conclude.

    Can you please revert from supporting circulars?

  15. Agrawal Arvind says:

    Earlier there was a limit of gst exemption for purchase upto 5000/- per day from unregistered persons. Whether this limit still there . Or there is no RCM now without any limit on purchase from unregistered persons.
    Also if GST applicable job work by unregistered jobber upto RS 20 lacs . What if job bill by the jobber cross Rs 20 lacs in a financial year

  16. R Rukmani says:

    Madam,
    is Manpower supplier’s charges – is it covered under RCM. (at present our supplier is in other state hence IGST is applicable).
    Kindly help us to understand RCM applicable for Manpower services?

  17. RAJIV KUMAR JAIN says:

    Madam
    Three people are director & share holders, if we are paying consultancy of Rs 1.50 lakh each month than total is 18 lakh than RCM will be applicable, Kindly confirm the same

  18. gowtham kumar vasamsetty says:

    Madam, Good explanation. But I have one doubt.
    Whether RCM applicable if GTA(Unregistered) provides service to a company. If yes, what is the rate applicable? Are there any threshold limits for applicability of RCM in this case?

  19. Prerana says:

    Madam, can you clarify if RCM is applicable on purchase of TDR for commercial properties? If yes then point of taxation i.e. when to pay tax?

  20. Pavan Talreja says:

    Commercial property owned by the director which was given on lease to the company and accordingly company is paying rent to the director.so whether rental service provided by the director would be covered under RCM.as services are provided in individual capacity and flashback in service tax regime it was specifically mentioned however in GST whether all the services provided by the director would be covered under RCM please assist

  21. Anil Gupta says:

    Nicely presented. It is learnt that RCM under sec 9(4) of CGST Act is exempt, whereas Sec 9(3) continues to apply. Hence RCM under other expense heads of profit and loss account may also be payable, like audit fee, accounting charges, printing and stationery etc. Please clarify

  22. Partho says:

    Madam,
    I found the article very helpful. Concise & well presented articles like this enables us to be in touch with studies which is debilitated mostly by pressures from other spheres of life. Kudos for the article. We look forward to such articles in future.
    Regards,
    Partho

  23. Sandeep Ghosh says:

    Very nicely presented. One question on Business Correspondent – Does it include Management consultants? or precisely who are Business correspondents

  24. Niraj says:

    In the list the services by directors ( excluding remuneration) are under reverse charge. It is no where given the word EXCLUDING REMUNERATION) . Can it be clarified how these words are included.

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