Reverse Charge Mechanism

Contents Covered

Reverse Charge Mechanism
GTA Services
Legal Services
Renting Residential Property
Renting of any property, other than Residential property
Services By Director
Renting of Motor Vehicle
RCM on Import of Services
Conclusion

Let us understand the meaning of Reverse Charge Mechanism (RCM) in simple words.

It simply means that the liability to pay tax is shifted to the buyer of the Product or services.

In general, the Seller is required to to collect the tax, but RCM is exactly the reverse of the same.

Let us understand the Applicability of RCM on various services

GTA Services

Goods Transport Agency provides Transportation services via road

Supplier

Goods Transport Agency

Recipient

Any person Registered under GST

Any Factory

Any Society

Any Body Corporate

Any Partnership Firm

Any casual taxable Person

Legal Services

Legal Services Provided by Lawyers as individual Lawyer or firm of Lawyers

Supplier

Individual Lawyer or Law Firm

Recipient

Any business entity

Renting of Residential Property

Services provided by way of renting of residential Property to a GST Registered person

Supplier

Any Person

Recipient

Any Person, registered under the GST

Renting of any property, other than Residential Property

Services provided by way of renting of commercial Property to a GST Registered person

Supplier

Any Person

Recipient

Any Person, registered under the GST

Services by Director

Services provided by the Director of a company to the company or to a body corporate in which he/she is the Director

Supplier

Director in the Company or Body Corporate

Recipient

The company or the Body Corporate

Renting of Motor Vehicle

Renting of Motor Vehicle, designed to carry passenger where the fuel cost is included in the total cost

Supplier

Any person, other than body corporate and make the supplies of the renting of motor vehicle to the body corporate and the GST is not charged @ 12%

Recipient

Any Body Corporate

RCM on Import of Services

Services Provided by any person, who is not situated in the taxable territory

Supplier

Any person, supplying services and is not situated in the taxable territory

Recipient

Any Person, registered in GST

Conclusion

RCM is one of the key are of GST, and it must be complied appropriately to avoid any penalty or interest or litigation.

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