FCM and RCM

Forward charge

Forward charge or direct charge is the mechanism where the supplier of goods/services is liable to pay tax.

For instance, if a chartered accountant provided a service to his client, the service tax will be payable by the chartered accountant.

Or for instance, if a car manufacturing company sold some auto parts to a trader and collected tax from the trader, the manufacturing company remits the tax.

Under the current tax system, most transactions are covered under the forward charge mechanism.