Reversal of ITC on account of supplies made on which GST to be paid by recipient under RCM

[Rajesh Kumar]

Sir, a taxpayer engaged in supplies of service some of which are taxable under forward change but some are taxable under RCM where tax to be paid by recipients.

sir I want to know that the amount of supplies made on which tax to be paid by the recipients under RCM , is he liable to reverse the ITC under Section 17 read with Rule 42.

[KASTURI SETHI]

In thiis scenario, no reversal of ITC is required against the tax paid under RCM.

[KASTURI SETHI]

With reference to my reply at serial no.1 dated 16.4.22, please read as under:-

"Reversal is required."

[KASTURI SETHI]

For the provider of service, it is exempt supply.

[KASTURI SETHI]

Under RCM, service recipient is deemed service provider. Service Provider is actual service provider. Turnover is always accounted towards the Service Provider's turnover. In this scenario, Service Provider (supplier) has not paid tax on his/her turnover (output value). Hence proportionate reversal of ITC is justified.

[Amit Agrawal]

I agree with views of Shri Kasturi Sethi Ji!

[Ganeshan Kalyani]

no tax on outward supply , no input tax credit allowed.

[SARTHAK MITTAL]

ITC is required to be reversed as per Section 17(3) read with Rule 42/43

[Ravinesh Sinha]

Reversal under Section 17 read with rule 42 is required only if exempted outward supply is made by tax payer . Otherwise not

[KASTURI SETHI]

Under RCM, outward supply is exempt for the supplier/provider of service.

AI Summary

Reversal of input tax credit required where outward supply is treated as exempt due to reverse charge mechanism.
Proportionate reversal of input tax credit is required under Section 17(3) read with Rule 42/43 where the supplier's outward supply is treated as an exempt supply because tax is payable by the recipient under the reverse charge mechanism; if the outward supply is not so treated as exempt for the supplier, reversal is not required.