Determining the GST Payer under Reverse Charge Mechanism

According to the Reverse Charge Mechanism, the GST must be paid by the recipient. However, to stay compliant with the GST regulations, the recipient needs to mention in the invoice, if any reverse charge tax is due for payment or not.

When paying GST under RCM, the following considerations must be made:

  • Only if the recipient of goods or services uses those goods or services for business or the advancement of business can they claim an ITC on the tax amount paid under RCM.
  • During liability discharge under RCM, it is mentioned that a composition dealer must pay its tax at the standard rates and not at the composition rates. They further are also ineligible to make any claims for input tax credits for the taxes paid.
  • The tax due or paid by the RCM may be subject to the GST refund cess.

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