New GST Ledger from Aug 2024| RCM Liability & ITC Statement

New GST Ledger from Aug 2024| RCM Liability and ITC Statement

To aid GST Taxpayers in accurately reporting Reverse Charge Mechanism transactions, the GST Portal has introduced a new statement called the “RCM Liability/ITC Statement.” This statement is designed to improve accuracy and transparency in handling Reverse Charge Mechanism transactions by capturing the following:

• RCM liability reported in Table 3.1(d) of GSTR-3B for a specific return period.
• The corresponding Input Tax Credit (ITC) claimed in Table 4A(2) and Table 4A(3) of GSTR-3B for the same period.

Reverse Charge Mechanism  Vs Forward Charge Mechanism

Reverse Charge Mechanism and Forward Charge Mechanism are two ways of tax collection under the Goods and Services Tax (GST) system.

Reverse Charge Mechanism :

Under the Goods and Services Tax law, the Reverse Charge Mechanism shifts the responsibility of paying Goods and Services Tax from the supplier to the recipient of goods or services. Normally, GST is paid by the supplier. However, in specified cases, the recipient is required to pay GST directly to the Govt.

In RCM, the recipient of goods or services is responsible for paying the GST directly to the government instead of the supplier. This mechanism is usually applied to certain goods and services as notified by the government, or when a supplier is an unregistered person supplying to a registered recipient. Example: Services provided by a goods transport agency to a business entity, where the business is liable to pay tax under RCM. RCM is mainly applicable in the following situations:

Supplies Notified under Section 9(3) of the CGST Act

The Govt has notified certain goods and services where GST must be paid by the recipient, such as Legal services by advocates, Goods Transport Agency (GTA) services, sponsorship services, director’s remuneration (in specified cases), and security services (subject to conditions).

Supplies from Unregistered Suppliers

RCM applies when a registered person receives notified supplies from an unregistered supplier, as specifically prescribed by the Government (general RCM on all URP supplies has been withdrawn).

Payment of GST under RCM :

GST under RCM must be paid in cash only; Input Tax Credit (ITC) cannot be used for payment at the time of discharge. After payment, the recipient can claim ITC, subject to Eligibility under Section 16, Goods/services used for business purposes. Proper documentation and reporting

RCM Liability and ITC Statement

This new statement will ensure that taxpayers can manage and reconcile their RCM liabilities and Input Tax Credit claims more effectively,  The statement you’re referring to indicates that from August 2024 onwards, specific requirements related to Reverse Charge Mechanism Liability and Input Tax Credit will be applicable.

For monthly GST filers, this will begin with the tax period of August 2024. For quarterly GST filers, it will apply starting from the July-September 2024 quarter.

To report the Opening Balance in the RCM ITC Statement, follow these steps: To access the RCM Liability/ITC Statement, you can navigate to :

Login >> Report RCM ITC Opening Balance or Services >> Ledger >> RCM Liability/ITC Statement >> Report RCM ITC Opening Balance

This navigation path will allow users to view and manage their Reverse Charge Mechanism liabilities and Input Tax Credit claims accordingly. GST Taxpayers should follow these guidelines:

• Excess RCM Liabilities Paid but ITC Not Availed:

If a taxpayer has paid excess RCM liabilities by declaring the amount in Table 3.1(d) of GSTR-3B but has not availed the corresponding ITC in Table 4(A)(2) or 4(A)(3) of GSTR-3B, they should report the positive value of the excess paid liability as RCM ITC as the opening balance in the RCM Statement.

• Excess RCM ITC Availed but Liability Not Paid:

If a taxpayer has availed excess RCM ITC in Table 4(A)(2) or 4(A)(3) of GSTR-3B but has not paid the corresponding liability in Table 3.1(d) of GSTR-3B, they should report the negative value of the excess claimed Input Tax Credit as RCM as the opening balance in the RCM Statement.

• Reclaiming Reversed RCM ITC:

  • If a GST taxpayer needs to reclaim RCM ITC that was reversed in earlier tax periods through Table 4(B)(2) of GSTR-3B, and if eligible, they should reclaim such RCM ITC in Table 4A(5) of GSTR-3B.
  • It is important to note that such reclaimed RCM ITC should not be reported in Table 4(A)(2) or 4(A)(3) of GSTR-3B, and this reclaimed RCM ITC reversal does not need to be reported as an RCM ITC opening balance.
• RCM liability must be reported in GSTR-3B, Self-invoice to be issued where supplier is unregistered, Payment to supplier should be made within 180 days (where applicable)