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Rcm on goods purchases

Ramdas Buran (Asst Manager Accounts) (72 Points)

27 July 2017

Dear All,

Reverse charge is applicable on Purchase of Goods. Please let us know Elegibility & Applicability ? And ITC procedure ?

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6 Replies

upasana gupta (Finance Professional) (3931 Points)
Replied 27 July 2017

Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge.

In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism.

The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods.

upasana gupta (Finance Professional) (3931 Points)
Replied 27 July 2017

Tax paid on reverse charge basis will be available for input tax credit if such goods and/or services are used, or will be used, for business. The service recepient (i.e., who pays reverse tax) can avail input tax credit.

Ahmed Ali (388 Points)
Replied 27 July 2017

Mr Ramdas Buran, now in GST regime any goods/services which are purchased/received from an unregistered person will attract GST under reverse charge.

As you are the buyer/Service recipient and you are registered, you shall find the HSN/SAC code and tax rates for the goods/services received and shall prepare a payment voucher in respect of each transaction. At the month end you are required to prepare a single tax invoice for all the purchases/services made/received under reverse charge.

Generally whatever tax you paid under reverse charge will be admissible to you as ITC in the subsequent month except some blocked credits which are mentioned in Sec 17(5) and are not admissible.

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Ramdas Buran (Asst Manager Accounts) (72 Points)
Replied 31 July 2017

Thanks a lot for your valuable reply. What is eligibility like in GTA there was limit of Rs.750/- which is same in GST Regime . But what abour purchase of goods from URD ? Can you please explain this ?