RCM liability / ITC statement

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This query is : Resolved

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A restaurant operating on rented premises from an unregistered landlord is paying GST on rent via Reverse Charge Mechanism (RCM). Although they correctly report this in their GSTR-3B, they cannot claim the Input Tax Credit (ITC) as they are on a 5% GST scheme without ITC. This results in the RCM tax amount accumulating in the 'RCM Liability/ITC Statement'. Currently, there's no direct method to reverse or liquidate this amount under GST, as it cannot be offset against output tax liability. The advice is to continue reporting it and maintain thorough records as an expense.

Gopalakrishnan. S

Gopalakrishnan. S (Querist)
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17 December 2024 Dear Experts,

We are running a restaurant on a rented premises and the Land lord is unregistered under GST.
While filing 3B return, we are showing the rent and respective RCM in Table 3.1 (d). But not claiming back the ITC as we are not supposed to, as we are under 5% GST without ITC.
The issue is, the tax amount, which we are paying through RCM gets accumulated in " RCM Liability/ITC Statement ".

While we could not avail the RCM, how to liquidate / Reverse this amount ?

Pls. Advice.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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18 December 2024 The RCM amount paid will accumulate in your "RCM Liability/ITC Statement" because, technically, you've paid the tax but cannot utilize it.
Under the current GST framework, there is no direct mechanism for reversing or liquidating this liability since you can't use it for offsetting your output tax liability. However, you should continue to report this amount under Table 3.1 (d) of GSTR-3B as you are doing now, reflecting the tax paid under RCM. Keep detailed records of these payments since they are part of your expense and not a recoverable credit.

Gopalakrishnan. S

Gopalakrishnan. S (Querist)
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19 December 2024 Ok Sir. Thank you very much.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 December 2024 You are welcome.

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