RCM applicability for Infrastructure Business

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This discussion clarifies which expenses fall under the Reverse Charge Mechanism (RCM) for infrastructure businesses, particularly those in real estate and government subcontracting like NHAI road works. Key areas include services from unregistered suppliers such as Goods Transport Agencies (GTA), subcontractors, legal services, security, manpower, and machinery hire. While RCM primarily applies to services, exceptions exist for certain goods like cement purchased from unregistered dealers.

Kunjan Pandya

Kunjan Pandya (Querist)

04 March 2020 Which expenses are applicable under RCM liability for Infrastructure Business ? Can any one share List of expenses which are covered under RCM ?

CA Anita Bhadra

CA Anita Bhadra (Expert)

05 March 2020 Infrastructure business means the real estate sector. Right?

List f expenses covered under RCM for the real estate sector:-
If the promoter (Builder/developer) fails to purchase at least 80% of the value of input and input services, from registered suppliers then the promoter (builder/developer) has to pay GST @18% on reverse charge basis on all such inward supplies for the shortfall amount .Tax rate on Cement purchased from unregistered Person would be 28%.

2. On TDR or floor space index supplied on or after 01-04-2019.

3. Differential tax arising on procurement of works contract services in relation to the construction of affordable residential apartments, if 50% criteria mentioned therein are not met.

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Kunjan Pandya

Kunjan Pandya (Querist)

05 March 2020 Madam, Thank your for your valuable reply.

Ours is Infrastructure Business related to Government Subcontract Work of NHAI Road Work, Aggregate Supply, Labour Work and Machinery Supply.

Request to provide expenses liable to RCM related to above nature of activity.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

20 July 2025 Common Expenses Liable to RCM in Infrastructure Sector
Services provided by goods transport agencies (GTA)
When you hire transporters (without GST registration) to transport goods, you pay GST under RCM.
Contractor/Subcontractor Services
When subcontractors provide services and are unregistered or liable under RCM, the main contractor needs to pay GST under RCM.
Legal Services
Payments made to advocates or law firms (if unregistered) attract RCM.
Security Services
If availed from unregistered service providers, GST under RCM applies.
Manpower Supply/Staffing Services
If service provider is unregistered, recipient pays GST under RCM.
Hiring of Equipment and Machinery
GST payable under RCM if supplier is unregistered.
Transport Services (Passenger and Goods)
GST under RCM for unregistered transport service providers.
Renting of immovable property (commercial rent)
GST payable under RCM if the landlord is unregistered and monthly rent exceeds threshold.
Key Points Specific to Infrastructure Sector:
For Government subcontract works like NHAI road projects, often subcontractors or suppliers may be unregistered, hence RCM applies.
If the supplier of goods or services is unregistered under GST, the recipient (you) is liable to pay tax under RCM.
For aggregate supply (construction materials) from unregistered dealers, GST under RCM is applicable.
Labour charges payable to unregistered labour contractors may also be covered under RCM.
What about Input Purchases (Goods)?
Reverse charge is usually applicable on services, not on goods.
Exception: Purchase of goods like cement or bricks from unregistered persons attracts RCM at specified rates.

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