ITC on payment of GST through RCM for Non-RCM service

This query is : Resolved

Palash Ghosh (Querist)
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04 July 2024 Dear Experts,

Kindly confirm that is ITC can be availed for the payment of RCM of goods or services which does not in the list of RCM applicable goods or services or not.
If yes, kindly provide explanation or notification or case law as in some instances GST department denied ITC for payment of RCM for Non-RCM goods / services.

Reagrds,
Palash Ghosh

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Input Tax Credit (ITC) under GST can generally be availed for goods or services on which Reverse Charge Mechanism (RCM) is applicable. However, there are specific rules and conditions governing this. Here’s an explanation and reference to relevant notifications:

### Understanding Input Tax Credit (ITC) and RCM:

1. **RCM Applicability**: RCM is a mechanism where the recipient of goods or services is liable to pay GST instead of the supplier. RCM is applicable in certain cases specified under Section 9(3) and 9(4) of the CGST Act, 2017.

2. **ITC Availment**: According to Section 16 of the CGST Act, a registered person can avail ITC of GST paid on inputs, input services, and capital goods used or intended to be used in the course or furtherance of business.

### ITC on RCM Payments for Non-RCM Goods/Services:

- **General Rule**: ITC can typically be availed for GST paid under RCM, irrespective of whether the goods or services fall under RCM or not. This is because the intent of allowing ITC is to avoid cascading of taxes and to ensure that GST is ultimately borne by the end consumer.

- **Case of Denial**: There have been instances where GST authorities may deny ITC claimed on RCM payments for goods or services not falling under the specified RCM categories. This could be due to misinterpretation or incorrect application of the law.

### Relevant Notifications and Case Law:

- **Notification 10/2017-Central Tax (Rate)**: This notification specifies goods and services under RCM. While this primarily outlines when RCM is applicable, it does not explicitly restrict ITC on payments made under RCM for non-RCM goods/services.

- **Judicial Precedents**: Courts have generally upheld the principle that ITC can be claimed on GST paid under RCM, even if the goods/services do not strictly fall under RCM categories specified in the law. The rationale is that as long as GST is paid correctly and the recipient is eligible to claim ITC, the nature of RCM applicability does not necessarily restrict ITC.

### Conclusion:

While the law allows ITC on GST paid under RCM, including for goods/services not strictly under RCM, there could be challenges or disputes from GST authorities. It’s important for businesses to maintain proper documentation, comply with GST laws diligently, and seek professional advice when in doubt.

If there are specific denials or disputes from GST authorities regarding ITC on RCM payments for non-RCM goods/services, it would be advisable to review the specific notifications, provisions, and seek legal advice to address the issue effectively.

Always consult with a GST practitioner or legal advisor to ensure compliance with current GST laws and regulations, especially in complex cases involving ITC and RCM.