RCM on Rent for Composite Dealer

[Praveen VR]

We have Clients who are composite dealers, hence cannot claim Input Tax Credit. With the RCM on Rent rule being incorporated, Should we still pay this (RCM on rent) without having any chance of adjustment against outward tax liability payment. If we pay this RCM payment, is there any chance of recovery or do we have an exemption for Composite dealers from paying RCM on rent

[Sadanand Bulbule]

Dear querist

The definition of " Input tax" under Section 2[62] [b], reproduced below, also includes tax payable under RCM.

(62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes–

(a) XXXX

(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;

In view of such inclusive definition, the composition dealers opting to pay tax under Section 10 are not entitled either to recover it or exempt from paying rent under RCM. In fact, rent paid under RCM becomes the cost of establishment..

[KASTURI SETHI]

Such availment of ITC by a composition dealer is clearly hit by Section 10 (4) of CGST Act. Pl. note the words, " __________nor shall  he be entitled to any credit of input tax." Emphasis is laid on the words, 'shall' & 'any'. The word, 'shall' stands for mandatory nature.

I fully support the views of Sh. Sadanand Bulbule, Sir

[Shilpi Jain]

No exemption. Tax has to be paid under RCM and no credit would be eligible.

AI Summary

Composite Dealers Must Pay RCM on Rent Without ITC Adjustment, Per Sections 2(62) and 10(4) CGST Act. A query was raised regarding whether composite dealers, who cannot claim Input Tax Credit (ITC), must pay Reverse Charge Mechanism (RCM) on rent without any possibility of adjustment against their outward tax liability. Responses clarified that, according to Section 2(62) and Section 10(4) of the CGST Act, composite dealers are not entitled to recover or be exempt from paying RCM on rent. The rent paid under RCM becomes a cost of establishment, and no ITC can be availed, emphasizing the mandatory nature of these provisions.