13 August 2021
we trade exempted goods as well as taxable goods we purchased Bran and pay freight should i pay rcm on this freight and also suggest that can we claim itc on such payment made on rcm
10 July 2024
When you purchase goods that are both exempted (like bran, which is generally exempt from GST) and taxable goods, and you pay freight on those purchases, here’s how the Reverse Charge Mechanism (RCM) and Input Tax Credit (ITC) apply:
### Reverse Charge Mechanism (RCM):
1. **RCM on Freight:** - According to GST regulations, RCM applies to specified services received from an unregistered supplier. Freight paid on transportation of goods is one such specified service. - If the freight is paid to an unregistered supplier (or to a GTA under specified circumstances), the recipient of the goods (you, as the buyer) will be liable to pay GST under RCM. - However, RCM does not apply if the supplier is registered under GST and issues a tax invoice charging GST on freight.
2. **Exempted and Taxable Goods:** - If you purchase exempted goods (like bran) and taxable goods together, and pay freight on these purchases, RCM will apply only to the portion of the freight attributable to taxable goods. - You need to segregate the freight amount between taxable and exempted goods. RCM will be applicable only on the portion of freight related to taxable goods.
### Input Tax Credit (ITC):
1. **ITC on Freight:** - You can claim Input Tax Credit on freight charges paid under RCM, provided: - You have paid GST under RCM on freight. - The freight is used for business purposes, including for both taxable and exempted supplies. - Since bran is exempted, you cannot claim ITC on the portion of freight attributable to exempted goods like bran. - You can claim ITC only on the portion of freight attributable to taxable goods.
### Practical Steps:
- **Segregation of Freight Charges:** Ensure proper segregation of freight charges between taxable and exempted goods. - **Payment under RCM:** Pay GST under RCM on the freight attributable to taxable goods. - **Claiming ITC:** Claim ITC on GST paid under RCM, but only for the portion of freight related to taxable goods.
### Conclusion:
- Freight charges incurred on transportation of goods where some goods are exempted and others are taxable require careful handling of RCM and ITC. - Ensure compliance with GST regulations by correctly determining the applicability of RCM, paying GST under RCM where required, and claiming ITC only on eligible amounts. - Consult with a GST expert or tax advisor for specific guidance tailored to your business and transactions to ensure proper compliance and maximize tax benefits where applicable.
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