Table of contents:
Under India’s Goods and Services Tax (GST) framework, the Reverse Charge Mechanism (RCM) shifts the tax liability from the supplier to the recipient for specific goods and services. We have covered this in detail already in our a blog.
Well, this approach ensures tax compliance, particularly in sectors with unorganized supply chains or where suppliers are unregistered.
Below is a detailed list of goods and services subject to RCM, as per the latest notifications and amendments
List of Goods Notified Under RCM
| S.No. | Description of Goods | Supplier | Recipient | GST Rate |
|---|---|---|---|---|
| 1 | Cashew nuts, not shelled or peeled | Agriculturist | Registered Person | 5% |
| 2 | Bidi wrapper leaves (tendu) | Agriculturist | Registered Person | 18% |
| 3 | Tobacco leaves | Agriculturist | Registered Person | 28% |
| 4 | Silk yarn | Manufacturer | Registered Person | Nil |
| 5 | Raw cotton | Agriculturist | Registered Person | 5% |
| 6 | Supply of lottery | State Government, Union Territory, or Local Authority | Lottery Distributor or Selling Agent | 28% |
| 7 | Used vehicles, seized and confiscated goods, old and used goods, waste and scrap | Central Government, State Government, Union Territory, or Local Authority | Any Registered Person | Applicable Rate |
| 8 | Priority Sector Lending Certificate (PSLC) | Any Person | Any Registered Person | Nil |
List of Services Notified Under RCM
| S.No. | Category of Supply of Services | Supplier of Service | Recipient of Service | GST Rate |
|---|---|---|---|---|
| 1 | Services provided by a goods transport agency (GTA) in respect of transportation of goods by road to specified entities. | Goods Transport Agency (GTA) | Specified recipients such as factories, societies, cooperative societies, registered persons, body corporates, partnership firms, or casual taxable persons. | 5% or 12% |
| 2 | Legal services, including representational services before any court or tribunal. | Individual advocate or firm of advocates | Any business entity located in the taxable territory. | 18% |
| 3 | Services provided by an arbitral tribunal. | Arbitral tribunal | Any business entity located in the taxable territory. | 18% |
| 4 | Sponsorship services provided to any body corporate or partnership firm. | Any person | Any body corporate or partnership firm located in the taxable territory. | 18% |
| 5 | Services supplied by the Central Government, State Government, Union Territory, or local authority to a business entity, excluding certain services. | Central Government, State Government, Union Territory, or local authority | Any business entity located in the taxable territory. | Applicable Rate |
| 6 | Services provided by a director of a company or body corporate. | Director | The company or body corporate located in the taxable territory. | 18% |
| 7 | Services provided by an insurance agent. | Insurance agent | Any person carrying on insurance business, located in the taxable territory. | 18% |
| 8 | Services provided by a recovery agent. | Recovery agent | Banking company, financial institution, or non-banking financial company located in the taxable territory. | 18% |
| 9 | Transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. | Person located in non-taxable territory | Importer as defined under clause (26) of section 2 of the Customs Act, 1962, located in the taxable territory. | 5% |
| 10 | Transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957. | Author or music composer, photographer, artist, etc. | Publisher, music company, producer, or the like, located in the taxable territory. | 12% |
| 11 | Supply of services by the members of Overseeing Committee to Reserve Bank of India. | Members of Overseeing Committee | Reserve Bank of India. | Exempt |
| 12 | Services provided by business facilitator (BF) to a banking company. | Business facilitator | Banking company located in the taxable territory. | 18% |
| 13 | Services provided by an agent of business correspondent (BC) to business correspondent. | Agent of business correspondent | Business correspondent located in the taxable territory. | 18% |
| 14 | Security services (services provided by way of supply of security personnel) provided to a registered person, with exceptions. | Any person other than a body corporate | A registered person located in the taxable territory. Exceptions include certain government departments and local authorities. | 18% |
| 15 | Services provided by way of renting of a motor vehicle designed to carry passengers to a body corporate, with conditions. | Any person other than a body corporate, who opts to pay tax at the rate of 5% and does not avail input tax credit. | Any body corporate located in the taxable territory. | 5% |
| 16 | Services of lending of securities under Securities Lending Scheme, 1997 of SEBI. | Lender (a person who deposits securities registered in his name or in the name of any other person duly authorized on his behalf with an approved intermediary for the purpose of lending under the Scheme) | Borrower (a person who borrows the securities under the Scheme through an approved intermediary of the Scheme) | 18% |
| 17 | Services provided by way of renting of residential dwelling to a registered person. | Any person | Registered person located in the taxable territory. | 18% |
| 18 | Services provided by way of transfer of development rights or Floor Space Index (FSI). | Any person | Promoter (Builder/Developer) | Applicable Rate |
Key Points:
- The recipient of these services is liable to pay GST under the Reverse Charge Mechanism.
- The applicable GST rates vary based on the nature of the service provided.
- Certain services have specific conditions and exceptions; it’s essential to refer to the latest GST notifications for detailed information.
By adhering to these notifications, businesses can ensure compliance with GST regulations and avoid potential penalties associated with non-compliance under the Reverse Charge Mechanism.
Recent Amendments
| S.No. | Amendment | Details | Effective Date |
|---|---|---|---|
| 1 | Self-Invoicing Time Limit | Rule 47A mandates issuing self-invoices within 30 days for goods/services from unregistered suppliers. | November 1, 2024 |
| 2 | Amendment to Time of Supply | Revised time of supply for services under RCM to earlier of payment date or 60 days after invoice issuance. | Finance (No. 2) Act, 2024 |
| 3 | Renting of Commercial Property Under RCM | Rentals by unregistered persons to registered entities brought under RCM. | GST Council’s 54th Meeting |
| 4 | Clarifications for GTA Services | Ancillary services (loading, unloading, packing) treated as composite supply under GTA. | GST Council’s 54th Meeting |
| 5 | Regularization of Past Tax Liabilities | Tax liability regularized for past periods on an ‘as is where is’ basis for specific services. | GST Council’s 54th Meeting |
| 6 | Exemption for Educational Services | GST exemption for affiliation services to government schools. | Notification No. 08/2024 |
This table provides a concise overview of the latest RCM amendments to ensure compliance and
Conclusion
Understanding the goods and services notified under RCM, their conditions, and applicable rates is essential for businesses to remain compliant and avoid penalties. Proper documentation, accurate tax calculations, and regular updates on GST amendments are key to successful implementation of RCM provisions.
For businesses, leveraging GST-compliant tools and consulting tax professionals can streamline compliance and reduce administrative burdens, ensuring smooth operations while adhering to legal obligations. By staying informed and proactive, businesses can optimize their tax liabilities and contribute to the efficiency of the GST ecosystem.
Disclaimer: The information provided in this article is for general informational purposes only and should not be considered as professional tax or legal advice. Please consult to a GST professional.
A product manager with a writer's heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.
