RCM on Royalty

[ABHISHEK Kumar]

Dear Sir,

One of our Client is a Government Contractor engaged in construction of Roads. The government deducts Royalty among other deductions from Gross Bill Value. Whether GST on RCM is payable on Such Royalty and if Yes at What Rate.

[YAGAY and SUN]

On which activity Government is deducting royalty. Please confirm.

However in our view Under RCM rate is 5% and if it is related to goods and rate applicable to goods will be rate of Royalty.

AI Summary

Reverse Charge Mechanism on royalty: GST payable under RCM at a specified rate; goods-related royalty taxed at goods' rate. Query whether GST under the Reverse Charge Mechanism applies to royalty deducted by government; advisory response states GST is payable under RCM at a prescribed RCM rate, and if the royalty is related to goods the GST rate applicable to those goods will govern the royalty's tax treatment.