List of Services under RCM in GST with Rates: Recent Amendments

List of Services under RCM in GST with Rates: Recent Amendments

List of Services under RCM in GST with Rates: Recent Amendments

The Goods and Services Tax  in India introduced the Reverse Charge Mechanism (RCM) as a tool to widen the tax net, enhance compliance, and ensure that even supplies from sectors with low registration rates fall under the GST system. Under RCM, the liability to pay the tax shifts from the supplier to the recipient. This article explores how RCM works, provides a detailed List of Services under RCM in GST with Rates with Recent Amendments along with their applicable tax rates, highlights key effective dates for various notifications, and includes additional insights.

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What Is the Reverse Charge Mechanism (RCM)?

Definition and Rationale

Under the standard (forward charge) mechanism, the supplier of goods or services collects and remits GST. In contrast, under the Reverse Charge Mechanism the recipient becomes liable to pay GST. This provision is intended to:

• Capture tax revenue from sectors with a high number of unorganized players.
• Minimize tax evasion where collecting tax from the supplier is challenging.
• Ensure compliance by transferring responsibility to registered recipients who are expected to be more compliant.

Legal Framework

RCM is provided under:

• Section 9(3) of the CGST Act, 2017 (and similar provisions in the respective State/UT Acts)
• Section 5(3) of the IGST Act, 2017

These provisions grant the power to notify specific categories of goods and services on which GST liability lies with the recipient.

Benefits and Challenges for Taxpayers

Benefits

• Enhanced Tax Collection: By shifting the liability to a registered and compliant recipient, the government increases tax remittance.
• Transparency: RCM transactions create an audit trail that improves tracking and compliance.
• Input Tax Credit (ITC): Registered recipients who pay GST under RCM (subject to conditions) can avail of ITC for business use.

Challenges

• Additional Compliance: Registered recipients must carefully record and report RCM transactions on GST returns.
• Cash Flow Impact: Recipients may face an impact on cash flow as they are responsible for remitting tax even if the supplier does not charge GST.
• Complex Documentation: The need to issue self-invoices and maintain detailed records adds to the compliance burden, particularly for smaller businesses.

List of Services and  Goods under RCM and Their Applicable Rates

Goods Notified Under RCM

S.No.	Description of Goods	Supplier	Recipient	GST Rate
1	Cashew nuts, not shelled or peeled	Agriculturist	Registered Person	5%
2	Bidi wrapper leaves (tendu)	Agriculturist	Registered Person	18%
3	Tobacco leaves	Agriculturist	Registered Person	28%
4	Silk yarn	Manufacturer	Registered Person	Nil
5	Raw cotton	Agriculturist	Registered Person	5%
6	Supply of lottery	State Government, Union Territory, or Local Authority	Lottery Distributor or Selling Agent	28%
7	Used vehicles, seized and confiscated goods, old and used goods, waste and scrap	Central/State Government, Union Territory, or Local Authority	Any Registered Person	Applicable Rate
8	Priority Sector Lending Certificate (PSLC)	Any Person	Any Registered Person	Nil

Services Notified Under RCM

S.No.	Category of Supply of Services	Supplier of Service	Recipient of Service	GST Rate
1	Services by a Goods Transport Agency (GTA) for transportation of goods by road to specified entities	Goods Transport Agency (GTA)	Factories, societies, cooperative societies, registered persons, body corporates, partnership firms, or casual taxable persons	5% or 12%
2	Legal services, including representational services before any court or tribunal	Individual advocate or firm of advocates	Any business entity located in the taxable territory	18%
3	Services provided by an arbitral tribunal	Arbitral tribunal	Any business entity located in the taxable territory	18%
4	Sponsorship services provided to any body corporate or partnership firm	Any person	Any body corporate or partnership firm located in the taxable territory	18%
5	Services supplied by government entities to a business entity, excluding certain services	Central/State Government, Union Territory, or Local Authority	Any business entity located in the taxable territory	Applicable Rate
6	Services provided by a director of a company or body corporate	Director	The company or body corporate located in the taxable territory	18%
7	Services provided by an insurance agent	Insurance agent	Any person carrying on insurance business, located in the taxable territory	18%
8	Services provided by a recovery agent	Recovery agent	Banking company, financial institution, or non-banking financial company located in the taxable territory	18%
9	Transportation of goods by a vessel from a place outside India up to the customs station of clearance in India	Person located in non-taxable territory	Importer as defined under clause (26) of section 2 of the Customs Act, 1962, located in the taxable territory	5%
10	Transfer or permitting the use or enjoyment of a copyright under section 13(1)(a) of the Copyright Act, 1957	Author, music composer, photographer, artist, etc.	Publisher, music company, producer, or the like, located in the taxable territory	12%
11	Supply of services by the members of Overseeing Committee to Reserve Bank of India	Members of Overseeing Committee	Reserve Bank of India	Exempt
12	Services provided by business facilitator (BF) to a banking company	Business facilitator	Banking company located in the taxable territory	18%
13	Services provided by an agent of business correspondent (BC) to business correspondent	Agent of business correspondent	Business correspondent located in the taxable territory	18%
14	Security services (supply of security personnel) provided to a registered person, with exceptions	Any person other than a body corporate	Registered person located in the taxable territory (exceptions include certain government departments and local authorities)	18%
15	Renting of a motor vehicle designed to carry passengers to a body corporate, with conditions	Any person other than a body corporate, opting to pay tax at 5% without ITC	Any body corporate located in the taxable territory	5%
16	Lending of securities under Securities Lending Scheme, 1997 of SEBI	Lender (person depositing securities with an approved intermediary)	Borrower (person borrowing securities under the Scheme through an approved intermediary)	18%
17	Renting of residential dwelling to a registered person	Any person	Registered person located in the taxable territory	18%
18	Transfer of development rights or Floor Space Index (FSI)	Any person	Promoter (Builder/Developer)	Applicable Rate

Recent Amendments (Effective as of December 2024)

S.No.	Amendment	Details	Effective Date
1	Self-Invoicing Time Limit	Rule 47A mandates issuing self-invoices within 30 days for goods/services from unregistered suppliers.	November 1, 2024
2	Amendment to Time of Supply	Revised time of supply for services under RCM to earlier of payment date or 60 days after invoice issuance.	Finance (No. 2) Act, 2024
3	Renting of Commercial Property Under RCM	Rentals by unregistered persons to registered entities brought under RCM.	GST Council’s 54th Meeting
4	Clarifications for GTA Services	Ancillary services (loading, unloading, packing) treated as composite supply under GTA.	GST Council’s 54th Meeting
5	Regularization of Past Tax Liabilities	Tax liability regularized for past periods on an ‘as is where is’ basis for specific services.	GST Council’s 54th Meeting
6	Exemption for Educational Services	GST exemption for affiliation services to government schools.	Notification No. 08/2024

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Note: The Reverse Charge Mechanism ensures tax compliance by shifting the tax liability from the supplier to the recipient for specific goods and services. It's

Key Considerations and Effective Compliance

• Self-Invoicing Requirement:Under RCM, if the supplier is unregistered or does not charge GST, the recipient must issue a self-invoice or payment voucher. This is essential for claiming ITC and proper reporting in returns.
• Time of Supply: 
• (a) The liability is determined by the earliest of the following:, 
• (b). The date of payment. 
• (c) For services, the date immediately after 60 days from the invoice issuance. 
• (d) If neither of these can be ascertained, the date of entry in the recipient’s books becomes the time of supply.
• Input Tax Credit (ITC) Eligibility: Registered recipients paying GST under RCM can claim ITC if the acquired goods or services are used for business purposes. Note that certain categories (e.g., GTA services at 5%) do not allow ITC.
• Detailed Record-Keeping: Businesses must maintain accurate records of all transactions under RCM, including self-invoices, supporting payment details, and copies of notifications (e.g., from the GST Council) to defend compliance during audits.

Conclusion

RCM under GST plays a important role in tax liability is captured effectively—especially from sectors and transactions that involve unregistered suppliers. With periodic updates and detailed lists such as those provided by Tata Nexarc, businesses have access to comprehensive guidelines that help ensure compliance. Registered taxpayers must adapt by issuing self-invoices where necessary, accurately determining the time of supply, and making timely GST remittances while availing eligible ITC.

With the extension of RCM to renting of commercial property by unregistered persons (effective 10 October 2024) and detailed notifications addressing diverse sectors—from transport and legal services to creative and recovery services—staying current with regulatory changes is crucial. Businesses are encouraged to consult tax professionals for personalized advice and to ensure that all RCM provisions are properly integrated into their compliance systems.

This article is intended for informational purposes only. For tailored advice and further clarification, please consult with your consultant.

Read More: Eligibility and Conditions for Taking Input Tax Credit (Section 16)