RCM/FCM

Great question, Surender!

Here’s the deal on RCM (Reverse Charge Mechanism) and FCM (Forward Charge Mechanism) in the context of renting motor vehicles:

What the circular says about RCM on renting motor vehicles:

RCM applies on renting of motor vehicles designed to carry passengers only if ALL the following conditions are met:

a) The supplier is other than a body corporate (i.e., individual, partnership, etc.)
b) The supplier does NOT issue an invoice charging GST @ 12%
c) The service is supplied to a body corporate

In your client’s case:

• Your client is an individual (condition a satisfied)

• Your client issued invoice charging GST @ 12% (condition b NOT satisfied)

• The recipient is a travel company (likely a body corporate) (condition c satisfied)

So, does RCM apply?

• Since condition (b) is not met (invoice already charges GST @ 12%), RCM will NOT apply.

• Your client is charging GST on the invoice, so the recipient (the travel company) does not have to pay GST under reverse charge.

What about FCM?

• FCM is the normal mechanism where the supplier charges GST on invoice and deposits it with the government.

• Since your client is charging GST @ 12%, the tax is under FCM.

Summary:

• RCM applies only if the supplier does not charge GST @ 12% and is an individual/other than body corporate supplying service to a body corporate.

• If supplier charges GST @ 12%, then FCM applies and supplier must pay GST collected.

• Your client issued invoice charging GST @ 12%, so FCM applies, not RCM.