LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

GST RCM on Royalty

Mohit Agrawal (AUDIT MANAGER) (104 Points)

02 December 2021

Company paid royalty for road construction contract.whether As recipient company need to pay RCM under Gst and secondly if government deducted royalty amount from bills and government itself paid royalty..then rcm is to be paid by the company or not

Reply
Follow
Share

4 Replies

Rajendra Prasad (Employee Private) (1824 Points)
Replied 03 December 2021

In my view and understanding, on Royalty paid to the Government by any business entity, has to be paid GST under Reverse charge due to the reason of services received by the Government, and not required to pay GST under Reverse Charge on Royalty deducted under Contractual obligation by the Government Departments from the bills submitted.

Mohit Agrawal (AUDIT MANAGER) (104 Points)
Replied 03 December 2021

Thanks

B.N.Mishra (Chartered Accountants) (63 Points)
Replied 06 January 2023

As per Sec. 7 of the CGST Act, 2017, “Supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business”. Therefore, Royalty charges will be treated as supply as it is the right given in return of consideration in the form of charges collected. You have to pay GST on full invoice value of contract work and there is no question of RCM. As we understood royalty is deducted by the awarder from your payment like TDS and other deductions.