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Mandi tax or RMC charges should included in the taxable value of RCM payment on Raw cotton?

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Sourav Das

30 Points Posted on 29 June 2023

A registered dealer purchases raw cotton from agriculturist.On such purchase he is liable to pay mandi tax in mandi itself. Sir the query is whether the amount of mandi tax paid on purchase is to be added in value of purchase while calculating RCM to be paid?

Replies (2)

Quick Summary

This discussion clarifies whether Mandi tax, paid by a registered dealer on raw cotton purchased from an agriculturist, should be included when calculating the taxable value for Reverse Charge Mechanism (RCM) payments. The consensus is that Mandi tax is a statutory levy on the buyer and not part of the consideration paid to the agriculturist. Therefore, it is not included in the RCM calculation for the purchase of raw cotton. However, it does form part of the cost for subsequent sales.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121543 Points Posted on 30 June 2023

If you are accounting mandi tax under different ledger and not clubbing it under purchases, then it will not be included for RCM calculation.

Aashok Kumar Sharma

Finance/Compliance Consultant

75651 Points Posted on 08 November 2026

Mandi tax isn't part of the supplier's value, but it adds to your cost:
• Mandi tax or market fee (APMC cess) paid by the buyer to the market committee is a statutory levy on the buyer. It's not part of the consideration paid to the agriculturist, so it isn't part of the value of supply. Raw cotton supplied by an agriculturist is under RCM at 5% (Notf 4/2017-CT(R) entry 3).
• Under RCM on raw cotton from an agriculturist, the value for RCM is the transaction value paid to the agriculturist. Mandi tax isn't included (it's not consideration to the supplier).
• For your onward sale: the mandi tax forms part of your cost (and your selling price), so it's included in your sale value.