Reverse Charge Mechanism in GST (RCM)

The fitment of rates of services were discussed on 19 May 2017 during the 14th GST Council meeting held at Srinagar, Jammu & Kashmir. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28%. The list of services that will be under Reverse Charge Mechanism as approved by the GST Council is given below.

Following services are prescribed under the reverse charge Mechanism in GST (RCM):

  1. Service received by person located in taxable territory from person located in non taxable territory.
    • Where any services are provided by person located in non taxable territory to person located in taxable territory is chargeable under reverse charge mechanism in GST.
    • This rule is not applicable in case of Online Information Access and Database Retrieval services provided by person located in non taxable territory to person located in taxable territory.
    • Service Provider should be -Any person who is located in a non taxable
      territory
    • Service receiver should be – Any person other than non assessee online recipient (Business Recipient).
    • As per section 2(16) of IGST Act definition of Non Taxable online recipient means means any Government, local authority,governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.
    • RCM Rate – 100% by SR
  2. Services provided or agreed to be provided by a goods transport agency (GTA) in respect of transportation of goods by road.
    • Service provider – Goods Transport Agency
    • Service Receiver –
      • Factory registered under or governed by the Factories Act, 1948
      • Society registered under the Societies Registration Act,1860 or under any other law for the time being in force in any part of India
      • Co-operative society established by or under any law
      • Person registered under CGST/SGST/ UTGST Act
      • Body corporate established, by or under any law
      • Partnership firm whether registered or not under any
        law including association of persons.
      • Casual taxable person
    • RCM Rate – 100% by SR
  3. Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly
    • Service Provider – Any individual or firm of advocate
    • Service Recipient – Business Entity
    • RCM Rate – 100% by SR
  4. Service Provided or agreed to be provided by arbitral tribunal
    • Service Provider – An Arbitral Tribunal
    • Service Receiver – Business Entity
    • RCM Rate – 100% by SR
  5. Sponsorship Services
    • Service Provider – An Arbitral Tribunal
    • Service Receiver – Business Entity
    • RCM Rate – 100% by SR
  6. Service provided by Government or Local Authority
    • Any services provided by government or local authority shall be chargeable under RCM except below services
      • Renting of immovable property
      • 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
      • services in relation to an aircraft or a vessel, inside or outside the
        precincts of a port or an airport
      • Transport of Goods or passengers
    • Service provider – Government or Local Authority
    • Service Receiver – Any business entity
    • RCM Rate – 100% by SR
  7. Service provided by director of company
    • Director sitting fees or any other charges payable to directory for service provided by director to company is chargeable on Reverse Charge Mechanism
    • RCM Rate – 100%
  8. Service provided by insurance agent
    • Any services provided by insurance agent to person carrying insurance business (i.e. – Insurance companies)
    • RCM Rate – 100% by SR
  9. Service of Recovery agent
    • Any service provided by recovery agent to banking company or financial institution or non-banking finance company
    • RCM Rate – 100% by SR
  10. Transportation of goods by vessel from place outside India up to the place in India
    • Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.
    • Service Provider – A person locate in non taxable territory to person located in taxable territory
    • Service Receiver – An Importer as defined U/s 2(26) of the Customs Act, 1962
    • RCM rate – 100% by SR
  11. Transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works
    • 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
    • Service provider – Author or Music Composer, Photographer, Artist etc.
    • Service receiver – Publisher, Music Company or Producer
    • RCM Rate – 100% by SR
  12. Radio taxi or Passenger Transport Services provided through electronic commerce operator under Reverse Charge
    • Service Provider – Taxi Driver or Rent a Cab Operator
    • Service Receiver – Any person
    • RCM  Rate – 100% by E-Commerce operator
    • Any service provided by Ola or Uber will be chargeable to them in RCM
  13. Services by way of job worker
    • Services by way of job work in relation to Cut and polished diamonds; precious and semi-precious stones, or plain and studded jewellery of
      gold and other precious metals, falling under chapter 71 of HSN codes
    • Service Provider – Job Worker
    • Service Receiver – Principal Manufacturer
    • RCM Rate – 100% by SR

Sr.13 Added in decisions taken by the GST Council in the  16th meeting held on 11th of June 2017

Also Read: When GST is to be paid in RCM – Point of Taxation

So this are the complete list of services which are taxable under Reverse Charge Mechanism in GST era.

Rules can be downloaded from here

Author: smit shah

I am a passionate Chartered Accountant having deep interest in taxation with combination of blogging.

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