ITC paid on RCM supplies from Unregistered Dealer - 2B Vs. Books Vs. 3B

[ANILKUMAR CHERUKU]

When GST paid on RCM basis in respect of services from unregistered (URD) eg. office rent paid for residential building. Once the GST paid on RCM basis, we claim ITC and book the GST liability, however, since the URD cannot report the same with GST Department.

1. ITC on GST paid on RCM is available in books and not available in GSTR 2B due to above reason

2. GST liability on the RCM is already discharged

3. When ITC is claimed as per books, it is not matching with GSTR 3B as the URD cannot submit the GST invoice and same do not appear in GSTR 2B. Can we claim the ITC as per books without ignoring the GSTR 2B.

4. What are the consequences due to above.

[Padmanathan KV]

Matching with GSTR-2B is not required for ITC on RCM paid on inward supplies from unregistered persons.

For easy reference, I am extracting section 16(2):

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;

Thus, the communication to recipient in GSTR-2B under clause (aa) is required only for tax invoice and debit note only. In case of RCM on unregistered persons, ITC is availed on the basis of self-invoice as required to be made under Sec. 31(3)(f) and it is not covered under clause (aa).

Even under GSTR-9, there will not be any mismatch in Table 8 as RCM is separately disclosed.

[ANILKUMAR CHERUKU]

Many thanks Padmanathan K for sharing the relevant extract of the section for easy reference.

However, in case of Rent paid to Unregistered Person (URD) for use of his Residential Building by Registered person for commercial purposes (office), the payment of rent is based on the rental or lease agreement. The RCM payment is supported by rental agreement instead of a invoice or debit note.

Believe, the rental agreement can be considered as a valid document similar to invoice or debit note for claiming the ITC in GSTR 3B.

[Padmanathan KV]

Dear ANILKUMAR sir,

No sir. Sec 32(3)(f) mandates a self-invoice for claiming ITC. Hence, rent agreement will not suffice for GST ITC purpose

[Padmanathan KV]

Sorry. Please read as 31(3)(f) in the above post.

[ANILKUMAR CHERUKU]

Once again thank you for clarifying and requoting the relevant section. I missed to mention that, self invoicing is a pre-condition for paying GST on RCM basis and issuing the same to Unregistered person(URD). Well noted.

[Amit Agrawal]

I agree with Shri Padmanathan Kollengode Ji! Restrictions u/s 16(2)(aa) does not apply to the given situation.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Self-invoice is an invoice for the purposes of GST Law.

The requirement of the invoice to appear in GSTR-2B does not apply since the self-invoice is not a document required to be disclosed in GSTR-1 in terms of section 37 and not merely beacuse there is no invoice issued for this transaction..

AI Summary

Input tax credit on RCM available based on self-invoice even if not reflected in GSTR 2B, disclose separately in returns.
ITC for tax paid under the reverse charge mechanism on supplies from unregistered persons is claimable by the registered recipient on the basis of a self-invoice as required by section 31(3)(f); the restriction in section 16(2)(aa) that links ITC to supplier furnished outward supply details in GSTR 2B applies only to invoices/debit notes from registered suppliers and does not prevent claiming ITC where tax is paid on RCM. Rental agreements do not substitute for the mandated self-invoice, and RCM entries must be disclosed separately in returns.