RCM under ISD

[Bhavesh Suthar]

With regard to reverse charge transaction under ISD, kindly confirm below procedure:

1) Invoice dated April '25 issued by supplier on normal registration (RCM).

2) RCM liability discharged by normal registration on 20th May '25.

3) Normal registration raises tax invoice to ISD to transfer RCM ITC to ISD in May'25. This is disclosed in GSTR-1 of May '25 in B2B.

4) ISD distributes the credit to its branches vide GSTR-6 of May '25.

Query 1: Supplier raises invoice to normal registration and not ISD. Is that correct.

Query 2: Normal registration raises invoice to ISD post payment in 3B (i.e. GSTR-1 of May'25). Can this be done in April '25 GSTR-1 itself simultaneously with the liability payment or does it have to be done post payment only in May '25.

[Shilpi Jain]

Since ISD cannot make RCM payment, the invoice by supplier to be issued to the normal registration. This is also in line with the existing provisions.

Invoice to the ISD registration can be made in Apr '25 itself.

[KARISHMA CHAWLA]

Can invoice be generated to transfer the RCM Credit to ISD in April month itself ?

The next comment looks more logical - RCM tax becomes our credit only after payment of such liability in the return-filing month, so then thereafter only it should be transferred to ISD in May 25 that too post 20th May 2025.

Please guide on the reasons maam

[YAGAY andSUN]

Let's break down your queries step by step in the context of GST reverse charge mechanism (RCM) and ISD (Input Service Distributor) procedures.

Query 1: Supplier raises invoice to normal registration and not ISD. Is that correct?

Yes, this is correct.

• Under the reverse charge mechanism (RCM), the normal registered taxpayer (i.e., the recipient of the goods or services) is responsible for paying the GST, not the supplier.
• The supplier raises an invoice to the normal registration (which is the recipient in this case), not directly to the ISD.
• The ISD is involved in distributing the input tax credit (ITC) among its branches but does not directly deal with the supplier in this case. The ISD comes into play only after the RCM is discharged and ITC needs to be transferred.

So, the supplier issues an invoice to the normal taxpayer (who is liable to discharge the RCM) and not to the ISD.

Query 2: Normal registration raises invoice to ISD post payment in 3B (i.e., GSTR-1 of May'25). Can this be done in April '25 GSTR-1 itself simultaneously with the liability payment or does it have to be done post payment only in May '25?

In the reverse charge scenario, the procedure is typically as follows:

1. RCM liability is paid through GSTR-3B when the payment is made.
2. The supplier's invoice is accounted for in the GSTR-1 of the month in which the reverse charge liability is paid (in this case, the payment is made in May).

Now, regarding the question of when the normal registration can raise the invoice to ISD to transfer the ITC:

• The normal registration can raise the invoice to ISD only after the RCM liability is discharged. This is because the normal taxpayer (the recipient) must have already paid the GST and claimed ITC for that period (in this case, the period for payment would be May).
• The invoice to ISD will typically be reported in May's GSTR-1 because that is the month the liability is paid, and the ITC needs to be transferred to the ISD at that point.

In short, the invoice to ISD cannot be raised in April's GSTR-1 because the RCM liability hasn't been paid yet. It must be done after the payment is made, which is in May's GSTR-1.

Summary:

1. Supplier raises invoice to normal registration and not ISD — this is correct.
2. Invoice to ISD can only be raised post-payment of the RCM liability, so it should be reflected in May's GSTR-1 (not April's GSTR-1).

***

[Neha Arora]

Is it necessary to issue e-invoice by Normal Taxpayer to ISD to transfer RCM (ITC )?

[Raghav Mehra]

Thank you for the explanation. Can you please confirm that we have to raise an e-invoice from normal registration (who paid RCM) to ISD registration to transfer RCM? 

And also, if the RCM invoice was under IGST, this invoice would also be under IGST. 

and the same in the case of CGST/SGST?

Or if the regular and ISD GST are registered under the same location, then in both cases it will be CGST/SGST?

[Ganeshan Kalyani]

I agree with the view of expert

AI Summary

ISD constituent: supplier invoices registered entity; that entity pays RCM, issues tax invoice to transfer ITC in same GST period. Under reverse-charge supplies where the recipient is an ISD constituent, the supplier invoices the recipient's normal registered entity (not the ISD), that entity discharges the RCM liability and then issues a tax invoice to the ISD to transfer the resultant ITC. The invoice/transfer should be recorded in the GST period when the RCM tax is discharged; therefore if RCM is paid in May 2025, the outward supply to the ISD and disclosure in GSTR-1 should be in the May 2025 return and then distributed via GSTR-6 in May.