Reverse charge list of goods and services under GST
Comprehensive List of Services Under RCM in GST
What is reverse Charge?
Normally, under Goods and Services Tax, also known as GST, a supplier of goods or services will collect taxes from the recipient and pay them to the government. This is referred to as forward charge. But, under the Reverse Charge, the recipient is responsible for paying taxes to the government.
Definition of Reverse Charge under GST Law:
According to Section 2(98) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act, 2017), “reverse charge” refers to the liability to pay tax by the recipient of a supply of goods or services or both rather than the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9.
What is the Reverse Charge Mechanism(RCM) under GST?
The Reverse Charge Mechanism (RCM) is a GST system in which the responsibility for paying tax moves from the provider to the recipient of goods or services. This means that the buyer, not the vendor, must pay the applicable GST directly to the government.
RCM is applicable in specific cases, such as:
- CBIC listed goods and services, such as those provided by a goods transport agency, a recovery agent, or a company director.
- GST registered buyers making purchases from unregistered sellers (with certain restrictions and exemptions).
- Importing services from international suppliers, irrespective of GST registration status.
RCM aims to promote tax compliance, fight tax evasion, and ensure tax collection from unregistered or non-GST suppliers. It shifts the tax burden to organized and registered organizations, making the process easier.
List of services under reverse charge in GST and its applicability
This section explains how supplies are classified according to the type of supplier and the nature of the supply. The following is a summary of the goods and services mentioned in the notification:
Goods:
Sr. No | Type of Goods | Supplier | Recipient |
1 | Cashew nuts (unshelled or unpeeled) | Agriculturist | Any registered person |
2 | Bidi leaves (Tendu) | Agriculturist | Any registered person |
3 | Tobacco leaves | Agriculturist | Any registered person |
4 | Silk yarn | Individuals/entities producing silk from raw silk | Any registered person |
4a | Raw cotton | Agriculturist | Any registered person |
5 | Lottery | State Government, Union Territory, or local authority | Lottery distributor or selling agent |
6 | Used vehicles, confiscated goods, old and used items, trash, and scrap | Central/State Government, Union Territory, or local authority | Any registered person |
Services:
Sr No. | Supply of Services | Supplier of Services | Recipient of Services |
1 | Taxable services given by a person living in a non-taxable territory are received by a person in a taxable territory other than a non-assessee online recipient. | Individual or entity in a non-taxable country | Individual or entity in a taxable country |
2 | A goods Transport Agency (GTA) provides services for the road transportation of goods. | Goods Transport Agency: a) Registered factory b) Registered society c) Cooperative society established by law d) Registered under CGST/SGST/UTGST Act e) Body-corporate f) Partnership firm g) Casual taxable person | Any entity availing transportation services |
3 | Legal services offered by an individual or a firm of advocates. | Individual advocate or firm of advocates | Any business entity |
4 | Services provided by an arbitral tribunal | Arbitral tribunal | Any business entity |
5 | Sponsorship services | Any individual or entity offering sponsorship | Any body-corporate or partnership firm |
6 | Services provided by government or local authority excluding specific categories | Government or local authority excluding: a) Renting immovable property b) Specific services such as those provided by the Department of Posts, aircraft/vessel services, transport of goods/passengers | Any business entity |
7 | Services offered by a director of a company or body corporate | Director of a company or a body corporate | Company or body corporate |
8 | Services offered by an insurance agent to businesses involved in the insurance business | Insurance agent | Entities engaged in insurance business |
9 | Services offered by a recovery agent to banking or non-banking financial institutions | Recovery agent | Banking company, financial institution, or non-banking company |
10 | Transportation of goods by ship, boat, or vessel from a non-taxable territory to the customs post in India. | Person in non-taxable territory | Customs station in India |
11 | Transfer or provide the use or enjoyment of copyrights relating to music, authorship, photography, or artistic work. | Copyright holder: Author, composer, photographer, etc. | Publisher, music company, producer |
12 | Radio taxi or passenger transport services facilitated by an E-commerce operator | Taxi driver or Rent-a-cab operator | Any individual or entity availing the service |
13 | Services offered by members of the Oversight Committee to the Reserve Bank of India | Members of the Oversight Committee formed by the RBI | Reserve Bank of India |
What are the Implications for the Taxpayers?
If you’re a taxpayer who has to pay tax under the Reverse Charge Mechanism (RCM), here’s what you need to know:
- GST Registration: You must register for GST, even if your turnover is less than the statutory limit, because there is no exception for RCM.
- Self-Invoice: You must provide a self-invoice for products or services purchased from unregistered suppliers and pay the tax on time.
- GST Returns: Report RCM-related details in your GST returns, such as GSTR-3B and GSTR-1.
- Input Tax Credit (ITC): You can claim ITC on RCM tax paid, subject to GST laws restrictions.
If you’re a supplier not covered by RCM:
- No GST Registration Needed: You don’t need to register under GST unless involved in other taxable supplies.
- No Tax Invoice: You won’t issue a tax invoice as the recipient will provide a self-invoice.
- No Reporting: You are not required to mention these supplies on your GST return.
- No ITC: You cannot claim ITC on tax paid by the recipient under RCM.
RCM is a unique GST provision that affects both suppliers and recipients in specified situations. Understanding the laws, services covered, and compliance requirements will help you avoid penalties and interest.
And with that, we’ve completed this post on List of services under RCM in GST. Please leave any questions or comments in the space below, and we are ready to assist.
