RCM Liability under GST- RCM ITC utilisation

[Chandrasekar Duraisamynaidu]

One of my new client is the scrap dealer who purchase scrap (unconditioned - not fit for further use harvestors & commercial vehicles ) from B2C,dismentling it and sold for scrap to B2B & B2C.

Query:

When purchase whether RCM is applicable for him

[KALLESHAMURTHY MURTHY K.N.]

Sir,

A registered person who purchases scrap from an unregistered person is liable to RCM u/s 9(3) effective from 10-10-2024 as per Notification No. 06/2024-Central Tax (Rate) dated 8th October, 2024. Tax is payable @18% by raising a self -tax invoice.

[Sadanand Bulbule]

Reply is welcomed.

[Shilpi Jain]

Metal scrap falling under these Chapters 72, 73, 74, 75, 76, 77, 78, 79, 80 or 81 - is liable under RCM, if the purchase is from an unregistered person by your registered client.

[Ryan Vaz]

RCM Applicability (Post Budget 2024 Amendment): Yes, RCM is applicable. As per Notification No. 06/2024-Central Tax (Rate) dated 08.10.2024, effective 10.10.2024, purchase of scrap from unregistered persons is liable to GST under Reverse Charge Mechanism u/s 9(3) of the CGST Act. This covers metal scrap including ferrous/non-ferrous items (HSN 7204, 7404, 7503, etc.). GST is payable @18% (CGST 9% + SGST 9%) via a self-invoice issued under Section 31(3)(f). The registered scrap dealer must:

1. Issue a self-invoice for each purchase from an unregistered B2C seller.

2. Discharge GST in cash via GSTR-3B for the RCM liability.

3. Report inward RCM supplies in Table 3.1(d) of GSTR-3B. ITC on RCM Paid:

Under Section 16 read with Section 41 of the CGST Act, ITC on RCM is available in the same tax period in which the tax is actually paid in cash - not merely on accrual. This ITC can be set off against output GST liability (CGST/SGST/IGST) as per the priority rules under Section 49.

ITC is admissible provided: - Goods are used for furtherance of business. - Self-invoice is properly issued and retained. - RCM liability has been paid in cash in GSTR-3B. Since the dealer sells scrap to B2B and B2C customers as a registered person, the RCM ITC is fully available for offset against output liability, neutralising the cash impact in the same period.

Recommendation:

Maintain purchase records with seller details (PAN/Aadhaar where available) and issue self-invoices promptly to avoid interest exposure under Section 50.

AI Summary

Reverse Charge Mechanism on scrap purchases requires self invoicing and cash GST payment; ITC claimable after payment. Reverse Charge Mechanism applies to purchases of scrap from unregistered persons effective 10 October 2024; the registered purchaser must issue a self invoice for each purchase, pay RCM tax in cash via GSTR 3B and report inward RCM supplies, and ITC for RCM is claimable only in the tax period in which the tax has been paid in cash, subject to usual eligibility conditions.