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FCM UNDER GST

Mahendravarman (Accountant) (60 Points)

24 August 2020

can anyone elaborated ABOUT FCM

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Taha (T) (405 Points)
Replied 24 August 2020

Forward charge mechanism is the process in which the person buying goods pays tax to the person selling goods if x sells to y x collects tax on the value supplied by him to y from y then the person selling goods will either deposit it to goverment or will claim itc basically compliance requirement is on the person providing goods or services there is another process called rcm reverse charge on which compliance is on person receiving or purchasing goods

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 August 2020

"Forward charge mechanism/direct charge mechanism/normal charge machanism" under GST is when GST is charged in the sales invoice by the supplier, same is collected from purchaser and finally deposited to govt. All normal sale transactions as examples of Forward charge.

Like you purchase clothes from shop, seller give you bill with GST, So, he collect amount including GST from you and than Pay GST part to Goverment. that is FCM.

Mahendravarman (Accountant) (60 Points)
Replied 24 August 2020

I need to explanation along with example

Taha (T) (405 Points)
Replied 24 August 2020

For eg if u buy clothes from a wholesaler and u r the retailer than u will pay the price of cloth +tax on it to wholesaler who will deposit the tax to goverment and in return u will get credit of the amount u paid as tax now when u will sell this to customer he will pay the price +tax on it to u and u will deposit it to goverment now the tax first which u paid to wholesaler u will get that credit of it so when u will pay the goverment I.e the amount which u got from customer minus the amount u paid to wholesaler eg u bought cloth =1000 and u paid tax on it rs 100 so u paid wholesaler rs 1100 now u sell to customer at 1200 200 as profit and tax on it is 120 so customer will pay u 1320 now u will pay goverment 120 but out of it u paid wholesaler rs 100 so 120-100 = 20 will be paid by u to goverment