List of items under RCM updated to include the Priority Sector Lending Certificate by a GST registered person to another GST registered person now falls under Reverse charge via CGST Rate Notification.
What is Reverse Charge Mechanism (RCM)?
Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.
Registration
All persons procuring gods/services notified above, on which GST is payable on reverse charge, have to be registered mandatorily as per Section 24 (iii) of CGST/SGST law, irrespective of the threshold.
Section 9(3)of CGST/SGST acts provides that, Government may specify categories of supply of goods or services which shall be paid on reverse charge basis i.e. tax shall be paid by the recipient of such goods or services. In this regards two notifications have been issued providing the list of goods and services, wherein the purchaser/recipient has the liability to pay GST.
The list of Goods.
TABLE
|
S. |
Tariff item, |
Description of supply of Goods |
Supplier of |
Recipient of supply |
|
(1) |
(2) |
(3) |
(4) |
(5) |
|
1. |
0801 |
Cashew nuts, not shelled or peeled |
Agriculturist |
Any registered person |
|
2. |
1404 90 10 |
Bidi wrapper |
Agriculturist |
Any registered person |
|
3. |
2401 |
Tobacco leaves |
Agriculturist |
Any registered person |
|
4. |
5004 to 5006 |
Silk yarn |
Any person |
Any registered person |
|
5. |
– |
Supply of lottery. |
State Government, Union Territory or any local authority |
Lottery distributor or selling agent. Explanation.-For the purposes of this entry, lottery distributor or selling agent has the same meaning as assigned to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules,2010, madeunder the 2 provisions of sub section 1 of section 11 of the Lotteries (Regulations) Act, 1998 (17 of 1998). |
The List of Services.
|
Category of Supply of Services |
Supplier of service |
Recipient of Service |
|
Supply of Services by a goods transport agency (GTA) |
(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the 2 Central Goods and Services Tax Act or the Integrated Goods and Services TaxAct or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person. Union Territory Goods and Services Tax Act; or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person; located in the taxable territory |
|
|
Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority by way of legal services, to a business entity. |
An individual advocate including a senior advocate or firm of advocates |
Any business entity located in the taxable territory |
|
Services supplied by an arbitral tribunal to a business entity. |
An arbitral tribunal |
Any business entity located in the taxable territory |
|
Services provided by way of sponsorship to a body corporate or partnership firm. |
Any person |
A body corporate or partnership firm located in the taxable territory. |
|
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 |
Central Government, State Government, Union territory or local authority |
Any business entity located in the taxable territory. |
|
Services supplied by a director of a company or a body corporate to the said company or the body corporate. |
A director of a company or a body corporate |
The company or a body corporate located in the taxable territory. |
|
Services supplied by an insurance agent to any person carrying on insurance business |
An insurance agent |
Any person carrying on insurance business, located in the taxable territory. |
|
Services supplied by a recovery agent to a banking company or a financial institution or a nonbanking financial company. |
A recovery agent |
A banking company or a financial institution or a non-banking financial company, located in the taxable territory. |
|
Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer |
||
|
Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India |
||
|
Radio taxi or Passenger Transport Services provided through electronic commerce operator |
Reverse Charge on Procurement by Registered Person from Unregistered Person
Section 9(4) of CGST/SGST Act provides that in case of procurement of goods or services by a registered person from an unregistered person then the registered person shall pay GST on reverse charge basis as if he is the person liable for paying the tax.
This provision of section 9(4) is applicable for all the procurement whether same is for procurement of raw material or any other direct or indirect expenses.
Time of Supply in case of Goods (sec.12)
In case of reverse charge, the time of supply shall be the earliest of the following dates:
(a) The date of receipt of goods OR
(b) The date of payment* OR
(c) The date immediately after THIRTY days from the date of issue of invoice by the supplier
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply shall be the date of entry in the books of account of the recipient.
*The date of payment shall be earlier of:
- The date on which the recipient entered the payment in his books OR
- The date on which the payment is debited from his bank account
Time of Supply in case of Services (sec.13)
In case of reverse charge, the time of supply shall be the earliest of the following dates:
(1) The date of payment** OR
(2) The date immediately after SIXTY days from the date of issue of invoice by the supplier
If it is not possible to determine the time of supply under (1) or (2), the time of supply shall be the date of entry in the books of account of the recipient.
The date of payment shall be earlier of:
- The date on which the recipient entered the payment in his books or
- The date on which the payment is debited from his bank account
Invoice in case of reverse charge
As per section 31(3)(f), person discharging GST liability under reverse charge under section 9(3) or 9(4) shall issue an invoice in respect of goods or services or both received by him from the supplier. Further as per 31(3) (g) shall issue a payment voucher at the time of making payment to the supplier.
RCM Accounting Entries in GST
Suppose GST rate is 5%. For Month of July
CASE I
Payment made within 30 days or 60 days as the case may be for goods or services respectively from the date of issue of invoice.
Invoice received on 03-07-22
Payment of Exp. (any exps. Covered under RCM) on 29-07-22
|
03-07-22 |
EXP A/C ……………Dr. |
20,000 |
|
|
To ABC Pvt. Ltd. A/c |
20,000 |
||
|
29-07-22 |
ABC Pvt. Ltd……...Dr. |
20,000 |
|
|
To Bank A/c |
20,000 |
Adjustment Entry
|
31-07-22 |
Reverse Charge A/C………Dr.(under Current Asset) |
1,000 |
|
|
To Output CGST A/c |
500 |
||
|
To Output SGST A/c |
500 |
GST Payment
|
31-07-22 |
Output CGST A/c…………Dr. |
500 |
|
|
Output SGST A/c…………Dr. |
500 |
||
|
To Bank A/c |
1,000 |
Entry for Transfer of Reverse Charge A/c to Input Tax Credit.
|
31-07-22 |
Input CGST A/c…………Dr. |
500 |
|
|
Input SGST A/c…………Dr. |
500 |
||
|
To Reverse Charge A/C………Dr. |
1,000 |
CASE II
Payment NOT made within 30days or 60days as the case may be for goods or services respectively from the date of issue of invoice.
Invoice received on 03-07-22
Payment of Exp. (any exps. Covered under RCM) not made
|
03-07-22 |
EXP A/C ……………Dr. |
20,000 |
|
|
To ABC Pvt. Ltd. A/c |
20,000 |
Adjustment Entry (assume service case i.e. 60 day lapsed).
|
30-09-22 |
Reverse Charge A/C………Dr.(under Current Asset) |
1,000 |
|
|
To Output CGST A/c |
500 |
||
|
To Output SGST A/c |
500 |
GST Payment
|
30-09-22 |
Output CGST A/c…………Dr. |
500 |
|
|
Output SGST A/c…………Dr. |
500 |
||
|
To Bank A/c |
1,000 |
Entry for Transfer of Reverse Charge A/c to Input Tax Credit.
|
30-09-22 |
Input CGST A/c…………Dr. |
500 |
|
|
Input SGST A/c…………Dr. |
500 |
||
|
To Reverse Charge A/C………Dr. |
1,000 |
CASE III
Advance Payment
Paid on 03-07-22
Bill received on 20-08-22
|
03-07-22 |
ABC Pvt. Ltd……...Dr. |
20,000 |
|
|
To Bank A/c |
20,000 |
Adjustment Entry
|
31-07-22 |
Reverse Charge A/C………Dr.(under Current Asset) |
1,000 |
|
|
To Output CGST A/c |
500 |
||
|
To Output SGST A/c |
500 |
GST Payment
|
31-07-22 |
Output CGST A/c…………Dr. |
500 |
|
|
Output SGST A/c…………Dr. |
500 |
||
|
To Bank A/c |
1,000 |
Entry for Transfer of Reverse Charge A/c to Input Tax Credit.
|
31-07-22 |
Input CGST A/c…………Dr. |
500 |
|
|
Input SGST A/c…………Dr. |
500 |
||
|
To Reverse Charge A/C………Dr. |
1,000 |
|
20-08-22 |
EXP A/C ……………Dr. |
20,000 |
|
|
To ABC Pvt. Ltd. A/c |
20,000 |
Please refer all the relevant sections, rules, amendments and consider all the necessary requirements as applicable. I am not responsible for any losses caused or incurred.
CAclubindia
