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FAQ- RCM

The document provides an overview of the Reverse Charge Mechanism (RCM) under Goods and Services Tax (GST), explaining that the recipient of goods or services is liable to pay tax instead of the supplier for certain notified categories. It clarifies that RCM applies to both goods and services, allows input tax credit under specific conditions, and outlines exemptions for small purchases from unregistered suppliers. Additionally, it details obligations regarding tax invoices and specific scenarios related to legal services, inter-state supplies, and transport services.

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11 views

FAQ- RCM

The document provides an overview of the Reverse Charge Mechanism (RCM) under Goods and Services Tax (GST), explaining that the recipient of goods or services is liable to pay tax instead of the supplier for certain notified categories. It clarifies that RCM applies to both goods and services, allows input tax credit under specific conditions, and outlines exemptions for small purchases from unregistered suppliers. Additionally, it details obligations regarding tax invoices and specific scenarios related to legal services, inter-state supplies, and transport services.

Uploaded by

dattavi98thaker
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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GOODS & SERVICE TAX (GST)

FREQUENTLY ASKED QUESTION ON REVERSE CHARGE MECHANISM

1. What is meant by Reverse Charge?

Answer – It means the liability to pay tax by the recipient of supply of goods or services instead of the
supplier of such goods or services or both in respect of notified categories of supply.

2. Is the reverse charge mechanism applicable only to services?

Answer – No, reverse charge applies to supplies of both goods or services, as notified by the
Government on the recommendations of the GST Council.

3. Can GST paid on reverse charge basis be considered as input tax?

Answer – Yes. The definition of input tax includes the tax payable under reverse charge mechanism.

4. Can a person take input tax credit without payment of consideration for the supply along with
tax to the supplier?

Answer – Yes, the recipient can take ITC. The condition of payment of consideration to along with tax
within 180 days from the date of issue of invoice is not applicable where tax is payable on reverse
charge basis.

5. Whether legal services provided by advocate firm are under reverse charge?

Answer – Yes.

6. A person receives a supply from an unregistered person in another state. Whether he has to
pay tax on reverse charge basis?

Answer – No, the person supplying the inter-state supply will have to compulsorily register irrespective
of his turnover and will be liable to pay tax, unless the supplier has been exempted from taking
registration. Thus question of supply by unregistered suppliers making inter-state supplies does not
arise.

7. Do even small sundry purchases from unregistered persons have to be levied to tax on reverse
charge basis?

Answer – No, purchases by registered persons from any or all unregistered persons of up to Rs. 5000/-
per day are exempted from GST.
8. A registered person purchases goods worth Rs. 6000/- on a single day from unregistered
persons. Whether he has to pay GST on Rs. 1000/- or Rs. 6000/-?

Answer – He will have to pay GST on Rs. 6000/-. Exemption is available only if the value of purchases
per day is less than Rs. 5000/-.

9. Under the new GST Act, the liability or payment of GST still with consignee or consignor?

Answer – Reverse charge mechanism has been provided in GST law for GTA and the recipient of GTA
service ( he may be consignor or consignee) is required to pay GST. Notification No 13/2017-Central tax
(rate) may be referred to.

10. Whether RCM is applicable on payments made for hiring of transport from unregistered GST
traders?

Answer – RCM under section 9(3) of the TSGST Act is applicable for GTA and not for transport of goods.
Where the vehicle is taken on rent or lease , it will be supply of service under SAC 9966 or 9973 and
supply of service will be taxable under RCM under section 9(4).

11. Whether tax under RCM is applicable for expenses incurred towards doctor sponsorship
programme?

Answer – As per notification no. 13/2017-Central Tax (Rate), Sl. No. 4 sponsorship to anybody
Corporate/Partnership firm comes under RCM.

12. Who will issue the tax invoice in case of reverse charge supplies?

Answer – The recipient receiving supplies from unregistered supplier will have to issue invoice himself
and pay tax. In other words, the recipient receiving supplies, which are subject to reverse charge, from a
registered person need not issue a tax invoice.

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