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Forward and RCM

04 April 2024

A registered dealer is giving services of waste Management to a company taxable @ 18, under proprietorship firm, He wants to open a transport under same proprietorship firm , can he opt RCM for transport business while charging tax under forward for another business

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5 Replies

Yasaswi Gomes new (Finance ) (4514 Points)
Replied 04 April 2024

Rcm is applicable for GTA. Any gst registered recipient can't pay tax

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Yasaswi Gomes new (Finance ) (4514 Points)
Replied 04 April 2024

Rcm is applicable for GTA. Any gst registered recipient can pay tax

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 04 April 2024

@ Lakhbir Sauja,

Yes, The Firm can do the transport service.

But, better advice is take another registration for transport service. May be he can register separately or vertical line .

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 04 April 2024

Originally posted by : Yasaswi Gomes new
	Rcm is applicable for GTA. Any gst registered recipient can't pay tax

@ Mr Yasaswi,

It's very bad to see your replies in query without knowing details as childish.

Don't see the query as chariot horse...

Please understand...

Money Money (413 Points)
Replied 06 April 2024

Certainly! Let’s break down the situation:

Waste Management Services:
The registered dealer is providing waste management services to a company, and the tax rate applicable is 18%.
These services fall under the forward charge mechanism, where the supplier (the registered dealer) charges and pays the GST directly to the government.
Proprietorship Firm with Two Businesses:
The same proprietorship firm wants to venture into the transport business.
The question is whether the proprietorship firm can opt for Reverse Charge Mechanism (RCM) for the transport business while continuing to charge tax under the forward charge for the waste management services.
Understanding Forward Charge and RCM:
Forward Charge: Under the forward charge, the supplier (registered dealer) pays the tax.
RCM: Under RCM, the recipient of the service (the company receiving the services) is liable to pay the tax directly to the government.
Options for Goods Transport Agencies (GTAs):
GTAs (including transport services) had limited options previously:
Charge GST at 5% without Input Tax Credit (ITC) and let the recipient pay tax under RCM.
Charge GST at 12% with ITC and pay tax under the forward charge.
However, recent amendments provide additional flexibility for GTAs1:
GTAs can now choose to charge GST at 5% under the forward charge (in addition to the existing 12% rate).
The choice must be made at the beginning of each financial year (by March 15th of the preceding year).
For FY 2023-24, the GTA needs to apply the option by March 15, 2023. There’s also an opportunity to claim the option for FY 2022-23 by August 16, 2022.
Specific Scenario:
In your case, the proprietorship firm can:
Opt for RCM for the transport business (if eligible) while continuing to charge tax under the forward charge for waste management services.
The two businesses can operate under different tax mechanisms.
Important Considerations:
Ensure that the transport business meets the criteria for RCM eligibility.
Keep records of the chosen options and comply with the timelines for declaration.