RCM APPLICABILITY ON PENALTY DEDUCTION IN THE CASE OF GOVT. CONT.

[KUNAL DESAI]

Whether GST on RCM Liability is applicable on penalty deductions made from RA bills by R&B department or Municipal Corporations considering they are not liable for registration in consideration with changes vide Notification-14/2018-CT(R)?

Changes are as below:

(i) in the Table, -

(a) against serial number 4, in the entry in column (3), the words “Central Government, State Government, Union territory, local authority or” shall be omitted;

(b) against serial number 5, in the entry in column (3), the words “Central Government, State Government, Union territory, local authority or” shall be omitted;

[KASTURI SETHI]

Concentrate on Services supplied 'BY Govt. authority' and 'TO Govt. Authority'. Line has to be drawn to go ahead in this matter.

[KUNAL DESAI]

Kasturji,

In my present facts, services are provided by Local Authority & Governmental Authority indirectly by way of deducting penalty on completion of contracts belatedly by contractor.

AI Summary

Reverse Charge Mechanism applicability on penalty deductions: GST consequence where government authorities deduct contractual penalties. Whether the Reverse Charge Mechanism applies to penalty deductions from RA bills by local or governmental authorities removed from registration requirement by Notification 14/2018, focusing on whether such deductions constitute a service supplied by or to a government authority and thus attract RCM.