Applicability of RCM on Government Services

[Ramanathan Seshan]

Dear Experts,

I’m looking for clarity on the applicability of the Reverse Charge Mechanism (RCM) under GST for certain services provided by the government. Specifically, does RCM apply to:

1. Factory license issuance and renewal

2. FSSAI license issuance and renewal

3. Other regulatory licenses provided by government departments

Requesting esteemed members to share practical experience, or official references regarding this.

Regards,

S Ram

[VIPUL JHAVERI]

govt services normally are exempt if its their constitutional functions two notifications are of importance applicability 13/2017 – Central Tax (Rate) dated 28th June 2017 and list services involving transactions with government have been exempted vide notification number 12/2017 – Central Tax (Rate) dated 28th June 2017 

1. Entry number 9 Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees

2. Entry number 47 Services provided by the Central Government, State Government, Union territory or local authority by way of- 

(a) registration required under any law for the time being in force; 

(b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force normally registration also would mean renewal fees as well, as its continuation of registrations however  various govt tender fees are asked to be paid RCM 

[YAGAY andSUN]

Great question — and an important one, especially for businesses dealing with regulatory compliance costs.

✅ Reverse Charge Mechanism (RCM) under GST for Government Services

RCM does apply to certain services provided by the Central Government, State Government, Union territory or local authority to business entities, as per Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017.

However, there are notable exemptions.

🔍 Key Rule: Notification No. 12/2017 – Central Tax (Rate)

Under Entry No. 5 of this notification, services provided by the Government to business entities are taxable under RCM, except:

1. Services by way of registration (e.g., factory licenses, trade licenses, FSSAI registrations).
2. Licensing services for carrying out any business.
3. Assignment of right to use natural resources (like mining, telecom spectrum).
4. Renting of immovable property (RCM applies but is separately notified).
5. Services where consideration is in the form of fees or charges levied under any law.

🧾 RCM Applicability on Specific Licenses

Service Type	Nature	RCM Applicability	Reference / Notes
Factory License (issuance/renewal)	Regulatory license under Factories Act	❌ Not under RCM (exempted)	Covered under Entry 5, Notif. 12/2017 – Govt. fee-based
FSSAI License (issuance/renewal)	Regulatory license for food business	❌ Not under RCM (exempted)	Considered licensing services; fee-based
Trade License / Pollution Control NOC	Statutory licensing	❌ Not under RCM (exempted)	Fees/charges under local/state law
Renting of Immovable Property	If by govt to a business entity	✅ RCM applies	Specifically notified in Notif. 13/2017
Mining rights / natural resource use	Licensing/right to use	✅ RCM applies	Explicitly covered under RCM

📌 Practical Understanding

If you are paying fees to the government for obtaining:

• A license (like FSSAI or Factory license),
• Registration,
• Or any statutory regulatory approval,

➡️ RCM is not applicable as these are covered under the exemption notification (Notification 12/2017).

You do not need to pay GST under RCM or issue a self-invoice in such cases.

✅ Conclusion

For factory licenses, FSSAI, and other regulatory licenses:

• These are statutory services provided by the government for a fee.
• GST is exempted, and RCM does not apply.
• No GST liability arises on the recipient business entity under RCM.

*** 

[Sadanand Bulbule]

Here I wish add that, GST is not payable on services provided by way of grant of alcoholic liquor licence against licence fees collected by the State Government, since it falls under the segment of statutory services.

[Shilpi Jain]

There is no specific exemption under GST for license taken unless it would fall under 'registration under any law'.

Thus if a license is issued as a part of being registered under any law, exemption is applicable from GST.

[FSSAI License]

Dear S Ram,

At Metacorp, we clarify the applicability of the Reverse Charge Mechanism (RCM) under GST for government services:

1. Factory License Issuance/Renewal: GST at 18% applies under RCM on fees paid to state authorities (if consideration exceeds INR 5,000 and no exemption applies). Businesses can claim Input Tax Credit (ITC).
2. FSSAI License Issuance/Renewal: 18% GST under RCM applies on fees for state licenses/registrations. No GST is charged by FSSAI on the FoSCoS portal; recipients discharge GST liability and can claim ITC.
3. Other Regulatory Licenses: GST at 18% under RCM typically applies on fees for services like pollution control or trade licenses, unless exempted. ITC can be claimed.

Metacorp’s Expertise: We ensure seamless RCM compliance, helping clients account for GST and optimize ITC claims. Refer to Notification No. 13/2017-Central Tax (Rate) and FSSAI orders for details.

For further assistance, contact Metacorp’s GST specialists.

AI Summary

Government Service License Fees Exempt from Reverse Charge Mechanism Under Specific GST Notification Conditions A discussion forum explores the Reverse Charge Mechanism (RCM) applicability for government services like factory and FSSAI licenses. Participants analyze GST exemptions under Notifications 12/2017 and 13/2017, concluding that regulatory license fees are generally exempt from RCM when they are statutory services or registration-related, with specific conditions determining tax treatment for government-issued licenses and approvals.