Implications of paying RCM using CENVAT Credit

[Ankush Chattopadhyay]

It is my understanding that RCM needs to be paid/settled using hard money, cash, and not paid/adjusted using CENVAT Credit.

But what are the implications in a situation/scenario where it has already been paid/adjusted using CENVAT Credit.

Thank you in advance,

Ankush.

[KASTURI SETHI]

That is an offence and wrongly used ITC and hence will attract interest and penalty. Deposit now in cash and save interest and intimate the department showing bona fide mistake. The Department may have lenient view if it is proved that you have acted in a bona fide manner.

[DR.MARIAPPAN GOVINDARAJAN]

RCM payment should be paid only in cash. No credit should be utilized for payment of RCM. If you have paid wrongly pay the amount along with interest and inform the same to the Department.

[Alkesh Jani]

Sir, It is request to please furnish the Authority that RCM is required to be paid in CASH. For my knowledge purpose.

with Regards

[KASTURI SETHI]

Read Section 49(4) with Section 2(82) of CGST Act, 2017.

[Alkesh Jani]

Sir, Thanks for the Information.

AI Summary

Reverse Charge Mechanism requires payment in cash; using input tax credit for RCM attracts interest and penalty. RCM liabilities must be discharged in cash and not by utilisation of CENVAT/ITC; wrongful use of credit to pay RCM constitutes misuse of input tax credit, attracts interest and penalty, and requires deposit of the tax in cash to regularise the position, with prompt intimation to the tax department potentially leading to leniency where a bona fide mistake is shown.