ISD registration - RCM security invoice received - how to pay

[Guuruswamy Raman]

We have one ISD registration - we received RCM invoice (security ). how to pay the GST RCM amount and claim ITC

[Sadanand Bulbule]

RCM liability cannot be paid thorugh ISD registration. It has to be discharged by the regular GST registration in cash and ITC can thereafter be availed and distributed through ISD, if eligible.

[Sadanand Bulbule]

Refer the following:

2026 (4) TMI 1044 - KARNATAKA HIGH COURT - M/s. MICRO LABS LIMITED Versus JOINT COMMISSIONER OF CENTRAL GST OFFICE OF THE COMMISSIONER OF CENTRAL GST PUNE-II, JOINT/ADDITIONAL COMMISSIONER OF CENTRAL TAX BENGALURU AND JOINT/ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES BENGALURU

[YAGAY and SUN]

Under GST law, an Input Service Distributor (ISD) registration cannot discharge liability under Reverse Charge Mechanism (RCM). In cases where services such as security services are received and are liable to GST under RCM, the tax must be paid by a regular GST registration and not through the ISD GSTIN. Since an ISD registration is only meant for distribution of input tax credit (ITC) and does not file GSTR-3B or maintain an electronic cash ledger for tax payment, it is legally not permitted to pay RCM liability. Accordingly, the regular GST registration of the company should discharge the RCM liability in cash through the electronic cash ledger, report the same in GSTR-3B, and thereafter avail eligible ITC subject to Section 16 conditions of the CGST Act. Once the ITC is validly availed by the regular registration, the same may be distributed to other units through the ISD mechanism by issuing ISD invoices in accordance with Rule 39 of the CGST Rules, wherever the input services pertain to multiple branches or registrations. Thus, the correct legal sequence is: payment of RCM by the regular GST registration availment of ITC distribution of credit through ISD, if eligible. This position has been affirmed by the Karnataka High Court in M/s. Micro Labs Limited vs Joint Commissioner of Central GST, wherein the Court held that an ISD registration is merely a mechanism for distribution of credit and cannot be treated as a taxable person for payment of RCM liability.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Report the RCM liability in GSTR-1 Table 4B on or before the due date (11th of the subsequent month) and then file GSTR-6 before the 13th instant distributing the eligible amount through an ISD invoice. Rule 39 and Rule 54 are relevant here which please go through and adhere to the same. Kindly note to distribute through ISD in the same month in which the ITC was availed. Thanks

[Shilpi Jain]

Ensure that the invoice is taken in the regular GSTIN in the same state where the ISD is registered.

Rcm gets discharged by this regular GSTIN and an invoice is issued by this GSTIN to ISD registration for further distribution.

[Amit Agrawal]

One may refer to Rule 54 (1A) of the CGST Rules, 2017.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Ganeshan Kalyani]

Yes, this is the practical way to cater to the RCM. Self invoice also to be raised.

AI Summary

Input Service Distributor cannot pay reverse charge liability; regular GST registration must discharge tax and distribute eligible credit.
Input Service Distributor (ISD) registration cannot be used to discharge reverse charge mechanism (RCM) liability on received services. The RCM tax must be paid by the regular GST registration through the electronic cash ledger, with reporting in the relevant GST return and, where required, issuance of a self-invoice. After valid payment, eligible input tax credit may be availed and distributed through the ISD mechanism in accordance with the CGST Rules.