Input tax credit on RCM

[Shyam Kedia]

Dear Sir's,

I have some clarrifications on RCM Liablity and ITC on RCM to be taken.

a. If RCM liability is relating to FY 2017-18 i.e. client has availed advocate services in FY 2017-18 but not paid RCM liablity till now. Now if he is going to pay, whether he can take credit in the current month after paying RCM liability through cash because RCM credit can be taken only after issuing invoice/Payment voucher as applicable. So i will issue Invoice or payment voucher as applicable and take the credit.

b. In other case, it is so that i have paid tax under RCM but only thing is i have not shwon separately in 3B in table 3.1(d) under 'Inward supplies liable to RCM' and while taking credit did not shown under 'ITC for tax paid on RCM' in table 4A(3) since GST was new and people were not excatly aware of this problem. i.e. simply i have paid tax which appeared in cash ledger and then adjusted against my normal tax liability. So Whether this is accepted by the department since GST was new in 2017-18.

[Ganeshan Kalyani]

a. GST under RCM for the advocate service for the year 2017-18 need to be paid now. The interest is also applicable. In my view, this transaction will be shown in annual return of FY 2017-18 and tax be paid thru DRC-03 and ITC of the same seems not eligible.

b. In my view, the tax on RCM paid and ITC claimed is correct. This should be accepted as there is no revenue loss to the Govt.

[KASTURI SETHI]

I agree with the views of Sh.Ganeshan Kalyani Ji in respect of both issues. I add further as under:-

1.As per Section 13(3) of CGST Act, 2017, time of supply of services for RCM, ITC is hit by time limitation. Otherwise also payment of tax made through DRC-03 Form for the purpose of Annual Return is not eligible for ITC.

2. It is a procedural lapse. The Department may accept, especially, in view of no revenue loss is involved. GST law is in its infancy and Common Portal System has also not been working perfectly since its implementation. So benefit would go to the assessee.

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir.

AI Summary

Input tax credit on reverse charge: payment through return-based routes may preclude ITC, while procedural lapses could be accepted. Reverse charge liabilities for prior fiscal periods must be paid with interest and reported in the annual return; payment via return-based mechanisms (such as DRC-03) does not permit taking input tax credit for that tax. Time limitations on claiming ITC for RCM supplies apply. If RCM tax was paid and the amount appears in the cash ledger but returns did not separately disclose inward RCM supplies or ITC table entries, that constitutes a procedural lapse which, absent revenue loss, the department may accept.