Blog Detail

𝗥𝗲𝘃𝗲𝗿𝘀𝗲 𝗖𝗵𝗮𝗿𝗴𝗲 𝗨𝗻𝗱𝗲𝗿 𝗚𝗦𝗧 𝗪𝗵𝘆 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 𝗦𝗼𝗺𝗲𝘁𝗶𝗺𝗲𝘀 𝗣𝗮𝘆 𝘁𝗵𝗲 𝗧𝗮𝘅

A business may need to pay GST even if the supplier does not charge it.

𝗥𝗲𝘃𝗲𝗿𝘀𝗲 𝗖𝗵𝗮𝗿𝗴𝗲 𝗠𝗲𝗰𝗵𝗮𝗻𝗶𝘀𝗺 (𝗥𝗖𝗠) shifts tax payment responsibility to the recipient for specified transactions.

𝗪𝗵𝘆 𝗥𝗖𝗠 𝗘𝘅𝗶𝘀𝘁𝘀

RCM helps collect tax on notified transactions, including certain supplies from small or unregistered providers and services received from abroad.

It supports tax compliance and competitive neutrality.

It also places responsibility on an identifiable business recipient where collecting tax from numerous small suppliers may be difficult.

𝗟. 𝗨𝗻𝗿𝗲𝗴𝗶𝘀𝘁𝗲𝗿𝗲𝗱 𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝗿𝘀

RCM does not apply to every purchase from an unregistered vendor.

It applies only where the law specifically notifies the supply or recipient category.

Review each transaction before paying tax.

𝟮. 𝗢𝘃𝗲𝗿𝘀𝗲𝗮𝘀 𝗦𝗲𝗿𝘃𝗶𝗰𝗲𝘀

A Chennai manufacturer obtaining taxable consultancy from an overseas firm may need to pay IGST under RCM, subject to applicable place-of-supply and import-of-services rules.

𝟯. 𝗦𝗲𝗹𝗲𝗰𝘁𝗲𝗱 𝗦𝗲𝗰𝘁𝗼𝗿𝘀

Certain services, such as specified legal services and goods transport agency services, can attract RCM.

E-commerce operator liability under 𝗦𝗲𝗰𝘁𝗶𝗼𝗻 𝟵(𝟱) is a separate mechanism, not ordinary RCM.

𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗜𝗺𝗽𝗮𝗰𝘁

A Coimbatore engineering company should identify RCM invoices, account for the tax, pay applicable liability in cash and claim eligible input tax credit under GST conditions.

This affects working capital because RCM tax is generally discharged through the electronic cash ledger before eligible credit can be used.

𝗔𝗰𝘁𝗶𝗼𝗻 𝗣𝗼𝗶𝗻𝘁𝘀 𝗳𝗼𝗿 𝗢𝘄𝗻𝗲𝗿𝘀

Ask your finance team to review vendor categories, overseas payments, notified supplies, self-invoicing where required, tax payments and input tax credit reconciliations every month.

Maintain a separate RCM register and confirm the applicable rate, time of supply and reporting in GSTR-3B.

𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆

RCM is transaction-specific.

𝗥𝗲𝘃𝗶𝗲𝘄 𝘆𝗼𝘂𝗿 𝗽𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗮𝗻𝗱 𝗲𝘅𝗽𝗲𝗻𝘀𝗲 𝗹𝗲𝗱𝗴𝗲𝗿𝘀 𝗯𝗲𝗳𝗼𝗿𝗲 𝗳𝗶𝗻𝗮𝗹𝗶𝘀𝗶𝗻𝗴 𝗚𝗦𝗧 𝗿𝗲𝘁𝘂𝗿𝗻𝘀.

𝗖𝗔 𝗦𝗮𝗶𝗹𝗲𝘀𝗵 𝗕𝗵𝗮𝗻𝗱𝗮𝗿𝗶

#GST #GSTIndia #BusinessOwners #MSMEIndia #TaxCompliance #Entrepreneurs #InputTaxCredit #CGST