Reverse Charge Mechanism
Under GST
Part 8
of GST FAQs Series!
- Shyamal Modi
- Last updated on: 1 October 2021
Does your business attract the provisions of the Reverse Charge Mechanism of GST?
In this 8th part of our GST Series, we have discussed provisions of Reverse Charge Mechanism under GST.
The provisions of RCM applies to your business if you receive such goods or services, as specified by CBIC, from an unregistered supplier. In such case you have to do Self Invoicing of such purchases, and deposit GST to the Govt.
Note: You can’t pay tax under RCM through your ITC balance!
Refer slide to get simplified view of RCM Provisions!
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Comprehensive list of Goods & Services falling under the purview RCM (Covering notifications till 30/09/2021):
A. Supplies of Goods under Reverse Charge Mechanism:
| Sr. No. | Nature of Supply of Goods |
Supplier of Goods | Recipient of Goods |
| 1 | Purchase of cashew nuts, not shelled or peeled | Agriculturist | Any registered person |
| 2 | Purchase of bidi wrapper leaves (tendu) | Agriculturist | Any registered person |
| 3 | Purchase of tobacco leaves | Agriculturist | Any registered person |
| 3A | Purchase of following essential oils other than those of citrus fruit namely: – a) Of peppermint (Menthapiperita); b) Of other mints : Spearmint oil (ex- menthaspicata), Water mint-oil (ex- mentha aquatic), Horsemint oil (ex- menthasylvestries), Bergament oil (ex-mentha citrate). |
Any unregistered person | Any registered person |
| 4 | Purchase of silk yarn | Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn | Any registered person |
| 4A | Purchase of raw cotton | Agriculturist | Any registered person |
| 5 | Purchase of lottery ticket | State Government | Selling agent |
| 6 | Purchase of used vehicles, seized and confiscated goods, old and used goods, waste and scrap | Central Government, State Government, Union territory or a local authority | Any registered person |
| 7 | Purchase of Priority Sector Lending Certificate | Any registered person | Any registered person |
B. Supply of Services under Reverse Charge Mechanism:
| Sr. No. | Nature of Supply of Services | Supplier of Services | Recipient of Services |
| 1 | Services of Goods Transport Agency (GTA) | Goods Transport Agency (GTA) | Any factory, society, co-operative society, registered person, body corporate, partnership firm, casual taxable person located in the taxable territory |
| 2 | Legal Services of the advocate | An individual advocate including a senior advocate or firm of advocates | Any business entity located in the taxable territory |
| 3 | Services of an arbitral tribunal to a business entity | An arbitral tribunal | Any business entity located in the taxable territory |
| 4 | Sponsorship services | Any person | Anybody corporate or partnership firm located in the taxable territory |
| 5 | Services supplied excluding, – (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. |
Central Government, State Government, Union territory or a local authority | Any business entity located in the taxable territory. |
| 5A | Renting of immovable property | Central Government, State Government, Union territory or a local authority | Any person registered under GST |
| 5B | Services by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project . | Any person | Promoter |
| 5C | Long term lease of land (30 years or more) against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project | Any person | Promoter |
| 6 | Director’s services (except remuneration) | A director of a company or a body corporate | The company or a body corporate located in the taxable territory |
| 7 | Services of insurance Agent | An insurance agent | Any person carrying on insurance business, located in the taxable territory |
| 8 | Services of Recovery Agent | A recovery agent | A banking company or a financial institution or a non-banking financial company, located in the taxable territory |
| 9 | Services of a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original dramatic, musical or artistic works. | Music composer, photographer, artist, or the like | Music company, producer or the like, located in the taxable territory |
| 9A | Services of an author by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary works. | Author (Not Applicable if author is registered under GST & paying tax under forward charge) |
Publisher located in the taxable territory |
| 10 | Services of Overseeing Committee | Members of Overseeing Committee constituted by the Reserve Bank of India | Reserve Bank of India. |
| 11 | Services of an individual Direct Selling Agents (DSAs) | Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm. | A banking company or a non-banking financial company, located in the taxable territory |
| 12 | Services of a business facilitator (BF) | Business facilitator (BF) | A banking company, located in the taxable territory |
| 13 | Services of business correspondent (BC) | An agent of business correspondent (BC) | A business correspondent, located in the taxable territory |
| 14 | Security services (by way of supply of security personnel) | Any person other than a body corporate | A registered person, located in the taxable territory except person registered under composite scheme |
| 15 | Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient. |
Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent to the service recipient | Any body corporate located in the taxable territory. |
| 16 | Services of lending of securities under Securities Lending Scheme, 1997 (“Scheme”) of Securities and Exchange Board of India (“SEBI”), as amended. | Lender i.e. a person who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the Scheme of SEBI | Borrower i.e. a person who borrows the securities under the Scheme through an approved intermediary of SEBI. |
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Shyamal Modi
He is a Practicing Tax Advocate having 5+ years of experience in Accounting, Direct & Indirect Taxes, Corporate Filings and other related fields.
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