RCM-REVERSE-CHARGE-MECHANISM

Everything know about the RCM full form under Gst Act 2017

RCM full form in GST is means to be Reverse Charge Mechanism in short chargeability means of paying tax gets reversed. 

In a sense, as we observed in the average case, the tax burden is liable on the only supplier of the goods and services or both.

In RCM full form, the mechanism chargeability gets reversed from the supplier to the recipient of the goods and services.

What is the RCM full form in GST?

The underlying meaning of the reversed charged mechanism is the tax burden transferred from the supplier of the goods and services to recipients.

The recipient of the goods and services or both is liable for payment. And deposit tax to the Government in this RCM full form .

RCM-full-form-REVERSE-CHARGE-MECHANISM-flowchart
RCM-REVERSE-CHARGE-MECHANISM-flowchart

Instance, providers of goods and services, or both have relief from pay tax and the receiver’s responsibility to deposit tax to the Government.

The imposition of the reverse charge mechanism successfully made on 1 February 2019 by the Government as per act and amendments.

The exemption limit, which specified up to INR 5000, has been effectively removed under the reverse charge mechanism.

Everything know about the RCM full form under Gst Act 2017

Process of payment to the Government: 

Reasons for the Reverse Charge Mechanism:

  • To avoid tax evasion when transactions held between unregistered and registered persons.
  • The unregistered person gets relief from the burden of tax compliance.

Applicability of Reverse Charge Mechanism:

Registered and Unregistered person:

A person who is a vendor or a supplier of goods and services supplies to another person who is a buyer or a receiver of supplies.

This supplier is the unregistered person, and others who receive the supplies registered under GST shall be under the criteria of RCM.

The registered person or a buyer of the supplies applicable for a reverse charge, and he is liable for payment of tax to the Government.

Both fees, i.e., in inter-state supply IGST and intra-state CGST and SGST, must be paid by the buyer or recipient of supplies.

An Ecommerce Operator:

An electronic commerce operator pay tax on behalf of the supplier who provides services to the recipients shall be held liable for pay tax to the Government.

Services which are providing through eCommerce operator the operator shall bind with collecting tax from the supplier and same pay to the Government.

In case eCommerce operators shall not have a physical existence in the taxable territory, then the operator appoints representatives on behalf of for making a payment.

Specific Supply of Goods or Services applicable for reverse charge mechanism specifies by the CBEC.

Time of Supply:

As the Earliest of the following dates for the Time of Supply of goods:

  • The date of receipt of goods.
  • Immediately preceding 30 days from the date of issuing the invoice by the supplier.
  • In books of account of recipient disclosed the time of payment or entry date.

For Example:

  1. Date of receipt goods 14 April 2020
  2. Invoice date 15 April 2020
  3. Entry Date as per books of accounts 16 April 2020

Therefore, the time of supply of goods is earliest of above the three is as per 14 April 2020.

For Example:

  1. Date of receipt goods 14 April 2020
  2. Invoice date 13 March 2020

The period after the 30 days of the invoice date is 13 April 2020

  • Entry Date as per books of accounts 16 April 2020

Therefore, the time of supply of goods is earliest of above the three is as per 13 April 2020.

As the Earliest of the following dates for the Time of Supply of services:

  • The date of payment
  • Immediately preceding 60 days from the date of issuing the invoice by the supplier.
  • In books of account of recipient disclosed the date of the amount or entry date.

For Example,

  1. Time of payment of services 14 April 2020
  2. Invoice date 11 February 2020

But the time after 60 days from the date of the invoice is 13 April 2020.

  • Entry Date as per books of accounts 16 April 2020

Therefore, the period of supply of services is earliest of above the three is as per 13 April 2020.

Payment of GST under this mechanism:

Payment made for reverse charge mechanism only by way of cash or through cash ledger.

Input tax credit under the RCM full form:

In the RCM full form, Reverse Charge Mechanism ITC may avail immediately after the cash payment of tax in the same month.

Composite Dealer:

Even the Composite Dealer also is fallen under the criteria of reverse charge mechanism, but he is not eligible for the credit on his tax payment.

As per the composition scheme rates, which are mention in it not applicable for it. Reasonable prices for the composite dealer are specifying, and it should pay for the tax.

Everything know about the RCM full form under Gst Act 2017

Advance Payment of RCM Full form:

In case when payment made in advance, it may subject to and in the ambit of reverse charge mechanism.

Types of Reverse Charge Mechanism:

There are two types mention under the RCM full form:

  • Dependents on Nature of Supply or Supplier
  • Taxable supply – in between unregistered persons to registered persons.

GST Compensation Cess:

Compensation Cess is available in case of a reverse charge mechanism. This to avail for compensating states which are in the loss on revenue after the implementation of the GST.

GST Compensation Cess is a purpose as to compensate state, which was applicable for five years from the implementation of the GST.

Points must be related to the RCM Full form:

  • A person registers under GST.
  • The input tax credit shall be available for all goods and services (in furtherance business) under RCM.
  • Individuals also take the benefit of ITC under RCM.
  • The recipient must issue payment vouchers.
  • If, in case of advance payment, there is full applicability of RCM.
  • Registered individuals who under the composition scheme can liable for the reverse charge but no credit available for it.
  • There are only intra-state transactions falls for reverse charge mechanism.
  • An unregistered dealer does not include in inter-state transactions under RCM.
  • No partial applicability of the opposite charge in GST. Recipient fully taxable for RCM whenever it applies.

What is the full form of RCM in GST?

In this case chargeability of tax burden get back to the receiver of goods and services instead of supplier. So, this called as Reversed Charge Mechanism in GST.

What RCM payable?

In normal condition tax burden always on supplier of the goods and services but in RCM the tax burden reverse on receiver who is liable to pay tax to the Government.

Is RCM applicable?

The RCM applicable on registered and unregistered both person. If the supplier is unregistered person but as per the criteria of RCM receiver should be registered person.

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