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Want to pay tax on forward charge and pay tax

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priyanshu shroti

45 Points Joined September 2022

If we provided Rental of motor vehicle service in which recipient body corporate pay tax other than body corporate i pay 5% tax but I want to opt forwa
rd charge in which I claim itc can I do so provide me complete guidance in this matter

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9456 Points Joined December 2011

You want to opt for forward charge on your rental of motor vehicle services, claim Input Tax Credit (ITC), and understand the implications.

Eligibility for Forward Charge:

1. *Recipient's Status*: Since the recipient is a body corporate, you're eligible to opt for forward charge.

2. *Service Classification*: Rental of motor vehicle services falls under the SAC (Service Accounting Code) 9966. Forward Charge Implications:

1. *Tax Rate*: You'll charge GST at the applicable rate (5% or 18%, depending on the type of vehicle) on the rental income.

2. *ITC Eligibility*: By opting for forward charge, you'll be eligible to claim ITC on the GST paid on inputs and input services used for providing the rental services.

3. *GST Returns*: You'll need to file GST returns (GSTR-1 and GSTR-3B) and report the taxable value, GST charged, and ITC claimed. Procedure to Opt for Forward Charge:

1. *Intimate the Recipient*: Inform the recipient (body corporate) about your intention to opt for forward charge.

2. *Issue Tax Invoice*: Raise a tax invoice charging GST on the rental income, mentioning the recipient's GSTIN and your own GSTIN. 3. *Maintain Records*: Keep records of the tax invoices, payment receipts, and ITC claims to support your GST returns. Key Considerations: 1. *Reverse Charge Mechanism (RCM)*: If you don't opt for forward charge, the recipient (body corporate) will be liable to pay GST under RCM.

2. *Tax Liability*: By opting for forward charge, you'll take on the tax liability, which might impact your cash flow.

3. *ITC Matching*: Ensure that the ITC claimed matches the GST paid on inputs and input services. To ensure a smooth transition, consider consulting a tax professional or accountant familiar with GST regulations.

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