Free Consultation by Expert
Many thanks to Setbharatbiz. We had an excellent experience working with its expert. They have a strong sense of professionalism when dealing with clients.
Mudassir CEO, Twinfinty DigiTech SolutionsWe would recommend Setbharatbiz incorporation services to any founder without a second doubt. The process was beyond efficient and shows Setbharatbiz founder's vision
Nagasrinivas Director,Prakash Nagasrinivas & Saradhy AssociatesI was searching for a company for assistance in the incorporation services. Then one of my friend tell me about Setbharatbiz and definitely the Setbharatbiz is the best.
Prakash Kakani Director, PNS EV HubOverview
Reverse Charge Mechanism (RCM) Compliance
Reverse Charge Mechanism (RCM) under GST refers to the transfer of the liability to pay GST from the supplier to the recipient of goods or services. RCM applies in specific scenarios, such as imports, procurement from unregistered suppliers, or notified services. Ensuring RCM Compliance is crucial for businesses to avoid penalties and claim Input Tax Credit (ITC) correctly. It involves identifying transactions subject to RCM, calculating GST liability, and timely payment and filing.
Importance
1. Legal Compliance : Adheres to GST regulations, avoiding penalties for non-compliance.
2. Correct ITC Claims : Enables businesses to claim ITC on GST paid under RCM.
3. Seamless Imports : Ensures compliance for transactions involving overseas suppliers.
4. Prevents Errors : Reduces risk of underpayment or overpayment of taxes.
5. Tax Audit Preparedness : Helps businesses stay ready for GST audits and scrutiny.
Documents Required
For Indian Nationals
For Foreign Nationals
Features
Features & Benefits of Reverse Charge Mechanism (RCM) Compliance
Tax Liability on Recipient
ITC Eligibility
Comprehensive Compliance
Risk Mitigation
Reverse Charge Mechanism
Customized Advisory
Record Maintenance
Audit Preparedness
Automated Calculation Tools
Periodic Updates
Comparison with Forward Charge Mechanism
| Feature | Reverse Charge Mechanism (RCM) | Forward Charge Mechanism |
|---|---|---|
| Tax Liability | On recipient | On supplier |
| ITC Eligibility | Available for recipient | Available for supplier |
| Scope | Specific transactions | General transactions |
| Payment Mode | Direct payment by recipient | Collected by supplier |
Frequently Asked Questions
What is Reverse Charge Mechanism (RCM)?
RCM is a GST provision where the recipient of goods or services is liable to pay GST instead of the supplier.
When does RCM apply?
RCM applies to specific transactions, such as imports, services from unregistered suppliers, and notified services like legal services.
Can ITC be claimed on GST paid under RCM?
Yes, ITC can be claimed if the goods or services are used for taxable business purposes.
What is the timeline for paying GST under RCM?
GST under RCM must be paid by the 20th of the following month, along with GSTR-3B filing.
Are unregistered suppliers subject to RCM?
Yes, RCM applies to certain goods and services procured from unregistered suppliers.
How is GST under RCM reported in returns?
RCM details are reported in GSTR-3B and annual returns (GSTR-9).
What are the penalties for RCM non-compliance?
Penalties include interest on unpaid tax and fines for incorrect or delayed filings.
Does RCM apply to export transactions?
No, exports are zero-rated and not subject to RCM.
What is GST PMT-06?
It is the challan form used to pay GST liabilities, including those under RCM.
Is RCM applicable to e-commerce operators?
Yes, for specific services, e-commerce operators are liable to pay GST under RCM.