Input tax credit availement on rcm paid for gta is eligible

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 August 2018 Dear Experts,

We pay the RCM on GTA @5%, where as In Invoices we are charging 18% based on SAC code 996711 as outward freight. so far from July-2017 to till date we have not claimed Input credit for the RCM paid on GTA.
But now auditors are telling to claim input credit since we are not service provider or GTA. is it valid ???.

your valuable feedback is awaited.

CA Anita Bhadra

CA Anita Bhadra (Expert)
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29 August 2018 Your Auditor is right .
As per Notification No 5/2017-Central Tax, - GST payable at 5% on GTA service will be payable by the service receiver under RCM and the input credit will also be taken by the service receiver..

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Querist : Anonymous

Querist : Anonymous (Querist)

29 August 2018 Dear madam,

The notification of 5/2017 CentralGovernment hereby specifies the persons who are only engaged in making
supplies of taxable goods or services or both, the total tax on which is liable to
be paid on reverse charge basis by the recipient of such goods or services or
both under sub-section (3) of section 9 of the said Act as the category of persons which means both are under same business??

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Under GST, the treatment of Input Tax Credit (ITC) for services received under Reverse Charge Mechanism (RCM) and the applicability of such credit depend on specific provisions and notifications issued by the government. Here’s a detailed explanation based on your query:

### **1. Reverse Charge Mechanism (RCM) and ITC:**

**Reverse Charge Mechanism (RCM):**
- Under RCM, the recipient of goods or services is liable to pay tax instead of the supplier. In your case, you are paying GST @5% on Goods Transport Agency (GTA) services under RCM.

**Input Tax Credit (ITC):**
- Generally, the recipient of services or goods under RCM can claim ITC of the tax paid under RCM if the goods or services are used for furtherance of business.

### **2. Notification 5/2017-Central Tax (Rate):**

**Key Points from Notification 5/2017:**
- The notification specifies categories of services where RCM applies, and it includes GTA services.
- It mentions that the person liable to pay tax under RCM must be engaged in making taxable supplies of goods or services.

**Implications for ITC:**
- If your business is engaged in making taxable supplies and the input services (GTA) are used for making such taxable supplies, you are generally eligible to claim ITC on the tax paid under RCM.

### **3. Your Scenario:**

**1. Charging 18% GST on Outward Freight:**
- If you are charging 18% GST on outward freight based on SAC code 996711, you need to pay GST under RCM at 5% on inward freight (GTA) to claim ITC.

**2. Not Claimed ITC So Far:**
- Since you have not claimed ITC on the RCM paid so far, you can typically claim this credit now, provided the input is used for business purposes.

**3. Auditor’s Concern:**
- The auditors might have concerns based on the nature of your business and the applicability of ITC under the specific conditions of RCM. However, generally, if you are engaged in taxable business activities and use the services covered under RCM, ITC should be allowed.

### **4. Validity of Claiming ITC:**

**Based on GST Provisions:**
- **ITC Eligibility:** You are eligible to claim ITC on RCM paid for GTA services as long as these services are used for furtherance of your business.
- **Same Business Principle:** Notification 5/2017 specifies the categories of persons liable under RCM, and if you fall within these categories, you can claim ITC.

### **5. Recommended Action:**

**1. Consult with a Tax Professional:**
- Verify with a tax professional or GST consultant to ensure compliance with the latest regulations and notifications.

**2. Claim ITC:**
- If it is confirmed that the services are used for taxable supplies, you can claim the ITC on the RCM paid for GTA services.

**3. Maintain Documentation:**
- Ensure proper documentation and records to substantiate your ITC claims for any future audits.

### **Conclusion:**

- **Yes**, you are generally eligible to claim ITC on the RCM paid for GTA services if the services are used for furtherance of business and if you are engaged in making taxable supplies.
- **Action:** You should proceed to claim the ITC for RCM paid, considering compliance with GST rules and regulations. Consulting with a tax advisor will provide clarity based on your specific circumstances.

If you have further questions or need assistance with the process, consulting a professional will ensure accuracy and compliance.