Reverse Charge Mechanism (RCM) under GST is the mechanism under which the buyer of goods or services is liable to pay GST to the government instead of the seller. It is applicable on the sale of notified goods and services or specified situations. Read about the compliances when Reverse Charge Mechanism under GST is applicable.
Compliances under Reverse Charge Mechanism of GST
- Compulsory Registration
The person liable to pay tax under RCM should compulsorily register under GST irrespective of the turnover. The threshold exemption of Rs.20 lacs is not applicable - Input Tax Credit
The buyer can claim the Input Tax Credit for which he has paid tax under RCM if all the conditions to claim ITC have been fulfilled. In this case, the buyer can claim ITC but not the seller - Payment of Tax
To pay the tax under RCM, the taxpayer can use balance from E-Cash Ledger only. They cannot use balance in the E-Credit Ledger. Both these ledgers can be viewed on GST Portal. - Tax Invoice
The Tax Invoice issued by the seller to the buyer must specifically mention that the tax has been paid by the buyer under the reverse charge mechanism. - Maintenance of Accounts
Each registered dealer must maintain accounts of all the sales on which he has paid tax under RCM. He must maintain all the proofs and records too.
FAQs
When a person buys goods or services from an unregistered dealer, he is liable to pay tax under RCM. He is also required to generate a self-invoice since the unregistered seller would not issue a GST compliant invoice.
Any person who makes inter-state sale of taxable goods must take compulsory registration under GST. Therefore, the dealer in Karnataka should opt for GST Registration since he/she is selling taxable goods outside his/her state.
Hey @HarshitShah
Goods/sectors that are out of the GST ambit include alcohol and specified petroleum products like petroleum crude, high-speed diesel, motor spirit, aviation turbine fuel and natural gas. Alcohol for human consumption continues to attract state excise duty and VAT. Tobacco and tobacco-based products attract both excise duty and GST. Taxes such as stamp duty, toll tax, road tax, electricity duty etc. are not part of GST.
Hope this helps!
Hey @HarishMehta
Customs duty and cess as applicable along with IGST+ GST compensation cess. IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.
Hope this helps!