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Reverse Charge mechanism

Ashvin mistry (1 Points)

21 December 2017

In reverse charge mechanism, can buyer or saler get Input tax credit?

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2 Replies

Pranoti Punmiya (Data Analyst) (158 Points)
Replied 21 December 2017

Under RCM, Buyer will have to pay tax and claim ITC for same.

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Ajay (CA Job) (512 Points)
Replied 13 January 2018

Dear Ashvin

The tax paid by a recipient under Reverse Charge Mechanism is a "input tax" as defined u/s 2(62) of CGST Act, 2017.

When you remit tax under RCM as a recipient (that is, the buyer), there can be 2 situations:

1. The recipient/buyer has opted to pay his output tax liability u/s 10 (that is, Composition Scheme) - in this case, the buyer cannot avail ITC (inclduing iput tax paid under RCM).

2. The recipient/buyer is a person who pays output tax otherwise than under Composition Scheme - in this case, the buyer can avail ITC. For this first he has to remit the tax under RCM in cash and then the same can be availed as ITC to pay output tax the next month.

In no case, the seller is entitiled to take ITC for the tax paid by buyer under RCM.

Regards

Ajay