Learn the current procedure for reporting RCM supplies under GST using GSTR-1 and GSTR-3B, confirming the withdrawal of the proposed new return system.
Under the reverse charge mechanism (RCM), the recipient pays GST on certain notified supplies. These must be reported correctly: the RCM liability is declared and paid in GSTR-3B (Table 3.1(d)) and the corresponding input tax credit is claimed in Table 4. This guide explains how to report RCM supplies in your GST returns.
The rules for reporting supplies under the Reverse Charge Mechanism (RCM) have seen changes between the initial and proposed GST return systems. RCM is a provision within the GST Act where the recipient of specific goods or services, rather than the supplier, is liable to pay the GST. Both parties, however, are required to report these transactions. This article will outline the reporting and tax payment procedures for RCM supplies under the past proposed framework and the existing system. It is important to note that the new GST return system has been officially withdrawn by authorities, meaning the filing of GSTR-1 and GSTR-3B remains the current practice.
RCM Under the Existing (Old) Return System
Under the previous GST return system, suppliers were mandated to report RCM-eligible sales on an invoice-by-invoice basis within Table 4B of their GSTR-1, specifically for outward supplies attracting reverse charge. Conversely, recipients were responsible for summarizing their reverse charge purchases in Table 3.1 (D) of GSTR-3B, covering inward supplies subject to RCM. The tax liability was to be settled by the recipient via the electronic cash ledger when submitting their GSTR-3B. Input Tax Credit (ITC) for RCM purchases could only be claimed by the recipient in the subsequent tax period, reported under Table 4A of GSTR-3B as eligible ITC.
RCM Under the Proposed (Withdrawn) New Return System
In the proposed new GST return system, which was subsequently withdrawn, suppliers would have reported a summary of RCM-applicable sales in Table 3D of GST RET-1, categorized as supplies with no liability. No RCM sales reporting was required for GST RET-2 or GST RET-3. Recipients, on the other hand, were to provide invoice-specific details of reverse charge purchases in Table 3H of GST ANX-1. These inward RCM supplies would then be automatically populated into Table 3B of the recipient’s GST RET-1. Tax liability was to be settled by the recipient through the electronic cash ledger upon filing GST RET-1, PMT-08, RET-2, or RET-3. Similarly, ITC for RCM purchases would have been auto-populated into Table 4A of the recipient’s GST RET-1, based on data from GST ANX-1.
Comparative Analysis: Old vs. Proposed New RCM Reporting
The (withdrawn) new GST return system proposed a reversal of roles for suppliers and recipients in reporting RCM transactions compared to the old system. The table below highlights these key distinctions, although it’s crucial to remember that the current system still adheres to the ‘Old return system’ column due to the withdrawal of the new framework.
| Aspect of Comparison | Old Return System | Proposed New Return System (Withdrawn) ||—|—|—|| Invoice-wise RCM reporting | Supplier | Recipient || Summary RCM reporting | Recipient | Supplier || Tax payment and ITC responsibility | Recipient | Recipient |
This proposed shift was primarily due to the design of GST ANX-1, which aimed to place the tax liability and its discharge directly on the taxpayers for specific supplies, differing from the structure of GSTR-1.
Taxpayer Responsibilities in RCM Reporting
Under the proposed (but withdrawn) new system, the tax amount and value for RCM supplies were intended to be automatically populated from GST ANX-1 into GST RET-1, RET-2, or RET-3. Recipients would then be responsible for settling their tax liability and claiming ITC based on these auto-populated figures. Therefore, it was critical for recipients to accurately report invoice-wise inward RCM supplies to avoid potential interest implications from delays. Given the withdrawal of the new system, taxpayers continue to follow the existing GSTR-1 and GSTR-3B procedures for RCM compliance.
Frequently Asked Questions
Where are RCM supplies reported in GSTR-3B?
Inward supplies liable to reverse charge go in Table 3.1(d), and the ITC on them in Table 4.
Who pays GST under reverse charge?
The recipient of the notified supply pays GST directly to the government.
Can I claim ITC on RCM tax paid?
Yes, subject to eligibility, ITC of the RCM tax paid can be claimed.
Is RCM paid in cash or through ITC?
RCM liability must be paid in cash; it cannot be discharged using input tax credit.
