GTA under both RCM & FCM Mechanism

[Asked by Guest]

What would be the implications if a GTA has billed under both RCM and FCM.?

what would happen with the input taken in FCM ? Do we have to follow FCM ?

[Ganeshan Kalyani]

GTA service supplier are exempted from GST registration. And if he wants to register then pay gst. Two rate option is available. Pay tax @12% with the benefit of input tax credit. Or pay tax @5% without availing input tax credit. If having registration and filing return is only costs the compliance.

[KASTURI SETHI]

Heavens will not fall !!

[KASTURI SETHI]

Though a period of one year has elapsed, yet GST Acts are still at infancy stage. That is why Govt. has resorted to unlimited amendments. So ensure that there must not be revenue loss. Procedural lapses are ignorable.

[Ganeshan Kalyani]

Right Sir, agreed with your views. The law is still evolving.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of the experts

So what should i suggest ? shall i ask them to be in FCM ? Service receivers have took input. Do i need to reverse that input ?

Are there any Case Laws under such conditions , Where both RCm and FCM has been charged.

[KASTURI SETHI]

8.

Goods Transport Agency Service (GTA)

Allowed option of 12% GST with full ITC under forward charge. 5% GST with no ITC will also continue. (However, the GTA has to give an option at the beginning of financial year)

This is an extract of decisions taken by GST Council's 20th meeting held on 5.8.2017. As per this you cannot adopt hybrid procedure. GTA can wither opt for FCM or RCM. Regarding GTA Service, there is no change between pre-GST era and post-GST era. First liability is cast upon consignor or consignee and , thereafter, GTA comes into play. Practically, normally consignor or consignee pays the freight and they can take ITC after payment of GST in cash.

It is now crystal clear that you cannot opt for both mechanisms i.e. FCM and RCM. If someone has committed such mistake, it is a procedural lapse. In other words, it is a bona fide lapse. You are advised to avoid such dual practice as it may attract maximum penalty of ₹ 25,000/- (General Penalty). Moreover, it is quite clear that burden of proof regarding availment of ITC and correct payment of tax is cast upon assessee.

GST law still being in its infancy stage, such bona fide mistake (one time) may be ignorable by the Govt. because no revenue loss is presumed to be involved.

[Nash Industries I Pvt Ltd]

Advisable Forward Charge for ease of operations.

Regards

S.Ramaswamy

[DR.MARIAPPAN GOVINDARAJAN]

Well explained Sethi sir

[KASTURI SETHI]

Sir, Thanks for liking and appreciating my reply on the issue.

Thank You Sethi Sir for the Reply.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir.

Hello Sir,

A follow-up question:

-> If the GTA (Vehicle Owner) is currently registered under RCM and wishes to move to FCM in the next FY, how would the following cases be treated:

1. If the GTA places own vehicles directly to a manufacturer? (Freight + 12% needs to be charged?)

2. If the GTA places own vehicles through a broker, where broker is unregistered under GST, who needs to pay GST? Example- Goods manufactured by party A is being placed through a GTA party B who asks the broker for a vehicle. The broker hires actual vehicle from GTA party C(vehicle owner), how does the party C bill the broker and which party pays the GST?

3. If the GTA party C, places own vehicle through another GTA Party B, how should party C bill party B?

Your guidance/advice would be highly appreciated.

Thanks in advance.

AI Summary

GTA tax option: choose forward charge to claim input tax credit; hybrid charging not permitted.
GTA services can be supplied under forward charge with input tax credit or under a reduced rate without input tax credit, with the supplier required to opt at the start of the financial year. Both mechanisms cannot be used simultaneously; doing so is a procedural lapse, the taxpayer bears the burden of proof for ITC and tax payment, and penalties may apply. Forward charge is advisable for operational ease and inadvertent one time errors may be treated leniently if no revenue loss is involved.