Rcm on sub contract expenses

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This query is : Resolved

M.V.Srinivas

M.V.Srinivas (Querist)

04 September 2017 Dearly respected experts,
If a contractor has given a part of the main contract to a sub contractor (Unregistered), whether RCM applies or not?
Let's for example, Main Contract - 1,00,00,000
Sub Contract - 5,00,000
My Query is
1. Whether the above sub contract expense comes RCM under GST under Sec 9(4) of CGST,
2. Accounting treatment for the above transactions?

Thanks in advance

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

20 July 2025 1. Whether RCM applies on sub-contract to an unregistered subcontractor?
Yes, RCM applies on services received from an unregistered subcontractor.
As per Section 9(4) of CGST Act, if the supplier of service is unregistered, the recipient (your contractor or your company) is liable to pay GST under Reverse Charge.
So, in your case:
The main contractor has given part of contract worth ₹5,00,000 to an unregistered sub-contractor.
The main contractor (recipient) must pay GST under RCM on the amount paid to the unregistered sub-contractor.
2. What about accounting treatment?
The payment to the unregistered sub-contractor will be treated as service received on which GST is payable under RCM.
The recipient (main contractor) needs to:
Raise a self-invoice for the GST liability under RCM.
Deposit the GST amount (calculated @ applicable rate on ₹5,00,000) to the government.
Claim Input Tax Credit (ITC) on the GST paid under RCM, if eligible.

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