RCM ON EXPENSES DECLARE IN PROFIT & LOSS ACCOUNT

[MAHTAB KHAN]

Received SCN from GST Dept. They asked to clarify RCM liability on expenses like Freight, Power & Fuel, Salary, Labour Charges, Staff Welfare, Insurance, Traveling, Conveyance, Telephone, Audit Fee, Accounting, Legal, Misc., Shop, Bank Charges, Printing & Stationery.

Also asked to explain treatment of Rebate & Discount received with evidence.

?? Which of these expenses actually attract RCM? And how to justify rebate/discount before dept?

AI Summary

Reverse Charge Mechanism applies to notified services like GTA and legal services; other business expenses remain under forward charge.
Most listed operating expenses do not attract RCM and remain under forward charge; RCM is confined to services notified under Section 9(3) & 9(4) such as GTA freight (subject to consignment note conditions), specified legal services, security services where notified, certain imports and services from unregistered suppliers. Items like freight, legal fees, insurance-agent services to insurers and rent to unregistered persons require vendor-status analysis. Rebate and discount adjustments must be supported by agreements, invoices and credit notes and linked to the trade of goods to avoid being treated as separate taxable service income.