What is RCM (Reverse Charge Mechanism) Under GST Act 2017

What is RCM (Reverse Charge Mechanism) Under GST Act 2017

The Reverse Charge Mechanism (RCM) is the process by which GST is paid by the receiver rather than the supplier. In this case, the recipient/receiver assumes the liability for tax payment rather than the supplier.

Section 2 (98) "reverse charge" means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub- section (4) of section 5 of the Integrated Goods and Services Tax Act;

Section 9: - Levy and Collection
Subsection (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 

and

Subsection (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.

Substitute of Section 9 (4): The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both." by s. 4 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.

Services included under the reverse charge mechanism are:

• Goods Transport Agency
• Recovery Agent
• Director of a company or body corporate
• An individual advocate or firm of advocates.
• An insurance agent 
  
  

Supply of Goods and Services Under RCM

Sl. No	Service	Provider of service	Percentage of service tax payable by service provider	Recipient of Service	Percentage of service tax payable by any person other than the service provider
1	Taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person  located in the taxable territory other than non-assessee online recipient (OIDAR)	Any  person who is located in a non- taxable territory	Nil	Any person located in the taxable territory other than non-assessee online recipient (Business Recipient)	100%
2	Services provided or agreed to be provided by a goods transport agency (GTA) in respect of transportation of goods by road	Goods Transport Agency (GTA)	Nil	(a) any factory registered under or governed by the Factories Act, 1948;	100%
				(b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force   in
				any part of India;
				(c)  any co-operative society established by or under any law;
				(d) any person registered under CGST/SGST/UTGST Act;
				(e)  any body corporate established, by or under any law; or
				(f)   any partnership firm whether registered or not under any law including association of persons.
				(g)  Casual taxable person
3	Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly	An individual advocate or firm of advocates	Nil	Any business entity.	100%
4	Services provided or agreed to be provided by an arbitral tribunal	An arbitral tribunal	Nil	Any business entity.	100%
5	Sponsorship services	Any person	Nil	Anybody corporate or partnership firm.	100%
6	Services provided or agreed to be provided by Government or local authority excluding, -	Government or local authority	Nil	Any business entity.	100%
	(1)        renting of immovable property, and
	(2)  services specified below-
	I) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
	(ii)   services in relation to an aircraft or a  vessel, inside or outside the precincts of a port or an airport;
	(iii)  transport of goods or passengers.
7	Services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate;	A director of a company or a body corporate	Nil	A company or a body corporate.	100%
8	Services provided or agreed to be provided by an insurance agent to any person carrying on insurance business	An insurance agent	Nil	Any person carrying on insurance business.	100%
9	Services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company	A recovery agent	Nil	A banking company or a financial institution or a non- banking financial company.	100%
10	Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India	A person located  in non-taxable territory to a person located in non-taxable territory	Nil	Importer as defined under clause (26) of section 2 of the Customs Act, 1962.	100%
11	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 relating to original literary, dramatic, musical or artistic works	Author or music composer, photographer, artist, etc.	NIL	Publisher, Music company, Producer	100%
12	Radio taxi or Passenger Transport Services provided through electronic commerce operator	Taxi driver or Rent a cab operator	Nil	Any person	100% by Electronic Commerce Operator