RCM Applicability on Proprietorship firm as DSA

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CA. Naveen Jain (Querist)
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22 April 2024 Sir,
I have a proprietorship firm registered under GST and having the DSA of banks.
Please suggest for my services as DSA for the bank, the Invoicing done by me for the loan source for the bank, Can I charge the GST on the billing amount OR will it attrach RCM as per Notification No. 16/2018-Integrated Tax (Rate), Dated: 26th July 2018 which states "Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to the bank or non-banking financial company"
Will the Sole proprietorship firm be treated as Individual OR can I charge the GST in the Invoicing

Regards

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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10 July 2024 As a proprietorship firm registered under GST and acting as a Direct Selling Agent (DSA) for banks, here’s how GST applicability would typically work:

1. **Nature of Service**: You are providing services as a DSA to banks, facilitating the sourcing of loans. This falls under the category of intermediary services.

2. **Notification No. 16/2018-Integrated Tax (Rate)**: This notification specifies that services supplied by individual DSAs (other than a body corporate, partnership, or LLP) to banks or non-banking financial companies (NBFCs) are subject to Reverse Charge Mechanism (RCM). This means the liability to pay GST shifts from the DSA to the recipient bank/NBFC.

3. **Proprietorship Firm Status**: As a proprietorship firm, you are considered an individual for the purposes of GST regulations. Therefore, if your firm is not registered as a body corporate, partnership, or LLP, you would fall under the purview of this notification.

4. **GST Charging**: Given the RCM notification, you would not charge GST on your invoices to the banks/NBFCs for the services rendered as a DSA. Instead, the banks/NBFCs are required to discharge the GST liability under RCM.

5. **Documentation**: Ensure that your invoices clearly mention that GST is payable under RCM by the recipient (bank/NBFC). This helps in compliance and avoids any potential issues during GST audits.

**Practical Steps**:
- Issue invoices to the banks/NBFCs without charging GST.
- Clearly indicate on the invoices that GST is payable by the recipient under RCM as per Notification No. 16/2018-Integrated Tax (Rate).
- Maintain proper records of invoices, payment receipts, and compliance documents to ensure you meet GST requirements.

It’s advisable to periodically review GST notifications and consult with a GST expert or tax advisor to stay updated on any changes or clarifications regarding RCM applicability to DSAs. This will ensure you comply with GST laws while carrying out your DSA activities effectively.

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