What is the benefit of Reverse Charge Mechanism for GTA when on one hand tax is charged in cash and on other hand ITC is provided for the same amount?
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What is the use of Reverse Charge Mechanism?
Replies (2)
RCM has come about where recipient category are mostly organised class and would pay the tax without any issues. This reduces collection and recovery costs for the govt.
In a situation that an entity already has credit balance, and RCM credit further accumulates the same, such taxes is paid in cash and credit remains unutilised, this helps govt. is increasing their funds.
Also, in a situation where RCM credit is not eligible, it is a direct cost to the taxpayer - Ex: RCM on renting of motor vehicle.
Understood, thanks 🙏
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