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Updated List of Reverse Charge Mechanism (RCM) under GST

The Goods and Services Tax (GST) regime introduced the concept of Reverse Charge Mechanism (RCM), wherein the recipient of goods or services is liable to pay the tax instead of the supplier. RCM is applicable in specific cases as outlined in the Central Goods and Services Tax (CGST) Act. In this article, we will provide you with an updated list of goods and services that fall under the Reverse Charge Mechanism, along with relevant examples.

Table of Contents

Reverse Charge Mechanism (RCM) under GST

List of Goods under RCM

List of Services under RCM

Conclusion

Reverse Charge Mechanism (RCM) under GST

Under the normal Forward Charge Mechanism of GST, the supplier of goods or services issues a tax invoice, collects the payment from the customer, and pays the tax portion to the government. However, in certain cases, the liability to pay the tax shifts to the recipient of the goods or services. This concept is known as the Reverse Charge Mechanism (RCM).

RCM is applicable in two scenarios as provided under the CGST Act:

  1. Section 9(3) of the CGST Act: Supply of specified goods/services.
  2. Section 9(4) of the CGST Act: Supply of specified goods/services made by unregistered persons to registered persons.

In the following sections, we will discuss the goods and services that fall under the Reverse Charge Mechanism.

List of Goods under RCM

As per Notification No.4/2017, dated 28/06/2017, the following goods are covered under the Reverse Charge Mechanism:

S. No.

Goods Supply

Seller of goods

Customer of Supply

1

Unshelled and unpeeled cashew nuts

Agriculturist

Any person user

2

Bidi leaf wrappers (tendu)

Agriculturist

Any person user

3

cigarette ashes

Agriculturist

Any person user

4

silk thread

anyone who produces silk yarn out of raw silk or silk worm cocoons for the purpose of supply

Any person user

4A

Raw cotton

Agriculturist

Any person user

5

lottery supply

Any municipal government, state government, or union territory

agent or distributor for lotteries

6

Old and used items that have been seized and confiscated, as well as rubbish and scrap

a local authority, a state government, a union territory, or the federal government

Any person user

7

Priority Sector Lending Certificate

Any registered person

Any registered person

List of Services under RCM

As per Notification No. 13/2017, dated 28/06/2017, the following services are taxed under the Reverse Charge Mechanism:

1. Agency for Goods Transport

Service provided: Goods transported by road through the Goods Transport Agency (GTA) are delivered to:Factory registered under Factories Act, 1948

  • Society registered under Societies Registration Act, 1860 or any other law
  • Co-operative Society established under any law
  • Everybody who has registered under the CGST, SGST, IGST, or UTGST
  •  ActBody Corporate
  • Partnership firm including Association of persons
  • Any casual taxable person located in taxable territory

RCM, however, shall not be applicable to the services offered by GTA in connection with the carriage of goods by road to:Department or Establishment of the Central or State Govt. or Union territory

  • Local Authority
    • Governmental organizations that have registered under the Central products and Services Tax Act of 2017 solely to claim tax credits under Section 51 and not to provide taxable products or services.

Goods Transport Agency (GTA), which has chosen not to pay GST at 12%, is the supplier of service.

Recipient of Service:

  • Factory registered under Factories Act, 1948
  • A society that has been authorized by the Societies Registration Act of 1860 or another law.
  • Co-operative Society established under any law
  • Any person registered under CGST/ SGST/ IGST/ UTGST Act
  • Body Corporate
  • Partnership firm including Association of persons
  • Any casual taxable person located in taxable territory

2. Legal Services

Service Type: Directly or indirectly rendered legal services by an individual advocate, including a senior advocate or firm of advocates. Legal services encompass representational services before any court, tribunal, or authority and include any service related to counsel, consultancy, or support in any way.

Supplier of Service: An individual or group of attorneys, especially senior attorneys.

Anyone running a business in the taxable area is the recipient of the service.

 

3. Arbitral Services

Services provided to a corporate company by an arbitral tribunal.

Service Provider: Arbitral Tribunal

Service Receiver: Business Entity

4. Sponsorship Services

Type of Service: Sponsorship Services offered to any partnership business or corporate body.

Service Provider: Any Person.

Any corporation or partnership operating inside the taxable territory is the recipient of the service.

5. Government Services

Services provided to a business entity by the federal, state, local, or union territory governments do not include the following:Renting of immovable property

    • The services listed below:
    • Agency services given by the Department of Posts to a person other than the Central Government, a State Government, a Union territory, or a local authority; speed post, fast parcel post, life insurance, and agency services.
    • Services related to an airplane or ship, whether they are provided inside or beyond the boundaries of a port or an airport
    • Transportation of passengers or commodities

Central government, state government, local government, and union territory are the service providers.

Any business entity that is based in the taxable area is the recipient of the service.

5A. Services by the Government

Type of Service: Rental of moveable property to a person who is registered under the Central Goods and Services Tax Act of 2017 for services provided by the Central Government, State Government, Union territory, or local government.

Central government, state government, local government, and union territory are the service providers.

Anybody registered under the 2017 Central Goods and Services Tax Act is the service's recipient.

5B. Services of transfer of development rights

Type of Service: Any person may provide services in exchange for the transfer of development rights or floor space index (FSI), including additional FSI, in order for a promoter to build a project.

Service Provider: Any Person

Service Receiver: Promoter

5C. Long term lease of land

Type of Service: Long-term leasing of land (30 years or more) for the construction of a project by a promoter in exchange for an upfront payment (referred to as a premium, salami, cost, price, development charges, or by any other name).

Service Provider: Any Person

Service Receiver: Promoter

6. Services by the Director

7. Insurance Agent S

Services provided to the aforementioned firm or body corporate by a director of the said company or body corporate.

A director of a business or other legal entity is the supplier of service.

A business or other legal entity based in the taxable territory is the recipient of the service.

ervices

Type of Service: Services rendered to a person conducting insurance business by an insurance agent.

Service Provider: An Insurance Agent

Any person conducting insurance business who resides in the taxable territory is the service's recipient.

8. Recovery Agent Services

Services rendered by a recovery agent to a banking company, financial institution, or non-banking financial company are classified as this service's type.

Service Provider: A recovery agent.

A banking firm, financial institution, or non-banking financial firm with a physical presence in the taxable territory is the service recipient.

9. Copyright Services

Type of Service: The provision of services by a music composer, photographer, artist, or the like to a music company, producer, or the like in exchange for the transfer or permission to use or enjoy a copyright covered by clause (a) of sub-section (1) of Section 13 of the Copyright Act, 1957 relating to original dramatic, musical, or artistic works.

Service provider: A musician, photographer, artist, or someone like.

The music label, producer, or similar entity based in the taxable area is the recipient of the service.

9A. Services of Author

Supplier of Service: The provision of services by an author to a publisher through the transfer or authorization of use or enjoyment of a copyright protected by clause (a) of subsection (1) of section 13 of the Copyright Act of 1957 with respect to original literary works.

Service Provider: Author

Publisher in the taxable area is the service's recipient.

10. Reserve Bank Services

Type of Service: The Overseeing Committee members' provision of services to the Reserve Bank of India.

Members of the Overseeing Committee set up by the Reserve Bank of India are the service provider.

Reserve Bank of India is the service's recipient.

11. Services by DSAs

Services provided to a bank or non-banking financial company (NBFC) by a single Direct Selling Agent (DSA), as opposed to a body corporate, partnership, or limited liability partnership firm.

Individual Direct Selling Agents (DSAs), not a corporation, partnership, or limited liability partnership firm, are the service provider.

Banking or non-banking financial institution based in the taxable area is the service recipient.

12. Business Facilitator

Type of Service: Services rendered to a banking organization by a business facilitator (BF).

Facilitator of Business (BF) is the service provider.

A banking organization that is based in the taxable area is the service's recipient.

13. Business Correspondent

Services offered to a business correspondent (BC) by an agent of a business correspondent (BC).

An employee of a business correspondent (BC) is the service provider.

A business correspondent who resides in the taxable territory is the service's recipient.

14. Security Services

Type of Service: Services offered to a registered individual through the provision of security people.

Any individual who is not a body corporate may act as a service provider.

A registered individual residing in the taxable territory is the service's recipient.

15. Renting of Motor Vehicle

Service offered to a body corporate through the rental of any passenger-carrying motor vehicle where the cost of gasoline is charged to the service recipient as part of the compensation.

Supplier of Service: Any individual, excluding a body corporate, who renders a service to a body corporate without issuing an invoice and who does not charge the service recipient with GST at the rate of 12%.

Any body corporate located in the taxable territory may be the recipient of the service.

16. Lending Securities Services

Type of Service: Securities lending services provided under the 1997 Lending Scheme. SEBI, as amended (Securities and Exchange Board of India).

Lender, or a person who deposits securities registered in his name or the name of any other person lawfully authorized on his behalf with an approved intermediary for the purpose of lending under the SEBI program, is the supplier of service.

Borrower, or any individual who borrows securities under the Scheme through a SEBI-approved intermediary, is the recipient of the service.

Conclusion

This article provided an updated list of goods and services that fall under the Reverse Charge Mechanism (RCM) under the GST regime. Understanding RCM is crucial for businesses to comply with tax obligations and ensure accurate tax payments. It is important to consult with tax professionals or refer to the relevant notifications and acts for complete and up-to-date information on RCM.

Please note that this article is for informational purposes only and should not be considered as legal or financial advice. It is always recommended to consult with professionals for specific guidance related to your business and tax requirements.

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

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