Reverse Charge Mechanism (Rcm)

Normally supplier of goods or service pay the GST on supply. But, under Reverse Charge Mechanism the recipient becomes liable to pay GST.

Services like service provided by Goods Transport Agency, Sponsorship Services, Import of Services etc., are covered under RCM.

New Services Under RCM Under GST

Vide Notification No. 29/2018 dated 31.12.2018 the following services will be covered under RCM w.e.f 01.01.2019

Example:

Mr. Z agent of Mr. Y ( a business correspondent) charges him for the services provided.

Mr. Y is liable to pay GST under RCM on the Value of service rendered.

*Security Services: Services provided by way of supply of security personnel

**RCM is not applicable if the above service is provided to the following persons:

• A department or establishment of Central or State government or Union territory or Local authority or Governmental agencies registered under GST only for purpose of deducting tax and not for making taxable supplies
• A composition dealer.

Example:

• XYZ a firm provided security services to ABC Ltd and charged for the said service. Here ABC Ltd is liable to pay GST under RCM.
• XYZ Ltd provided security services to ABC Ltd and charged for the said service. Here XYZ Ltd is a body corporate hence it should charge GST to ABC Ltd.
• XYZ a firm provided security services to Mr. A (a composition dealer). Here the liability to pay GST is on XYZ as Mr. A is a composition dealer.

Changes In Gta Services Liable To Rcm

RCM on GTA services will not be applicable to the following person w.e.f 01.01.2019:

A department or establishment of Central or State government or Union territory or Local authority or Governmental agencies registered under GST only for purpose of deducting tax and not for making taxable supplies

Example:

DEF Ltd is a governmental agency to which AB a goods transport agency provided services. Here the Goods Transport Agency needs to pay GST.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."