Clarification on Time Limit for RCM Supplies from Unregistered Persons u/s 16(4) of CGST Act, 2017

Last updated: 27 June 2024

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This notification clarifies the rules regarding the time limit for claiming Input Tax Credit (ITC) when receiving supplies from unregistered persons under the Reverse Charge Mechanism (RCM). It addresses situations where recipients initially don't pay RCM tax or issue an invoice, but later do so after clarification or audit, and then seek to claim ITC on the tax paid.

F. No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
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North Block, New Delhi
Dated the 26th June, 2024

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered persons – reg.

Representations have been received from trade and industry seeking clarity on the applicability of time limit specified under section 16(4) of Central Goods & Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) for the purpose of availment of input tax credit (ITC)by the recipient on the tax paid by him under reverse charge mechanism (RCM) in respect of supplies received from unregistered persons. It has been represented that in some cases, where tax is payable on reverse charge basis by the recipient, such as, where an activity is performed by the overseas related person for the entity located in India and no consideration is involved, such an activity may not be considered as supply of services by the concerned recipient in India and accordingly, no invoice is issued as well as no tax is paid by the said recipient under RCM in respect of the same. However, later on, either on their own on the basis of some clarification issued by the department or on the basis of some court judgement or on being pointed out by the tax authorities during scrutiny or audit or otherwise, the said recipient issues the invoice and pays the tax under RCM, along with interest, and claims input tax credit on such tax paid.

For full notification please refer to the attachment

FAQ :

The notification clarifies the applicability of the time limit under Section 16(4) of the CGST Act, 2017, for claiming input tax credit (ITC) on supplies received from unregistered persons where tax is paid under the Reverse Charge Mechanism (RCM).

RCM stands for Reverse Charge Mechanism, where the recipient of goods or services is liable to pay the tax, rather than the supplier.

It addresses scenarios where a recipient receives supplies from unregistered persons, pays tax under RCM, but later claims ITC on that tax paid, and seeks clarity on the time limit for this claim.

A recipient might pay RCM tax later due to their own initiative, a departmental clarification, a court judgment, or if pointed out during a tax scrutiny or audit.

The notification seeks to clarify the applicability of the time limit under Section 16(4) for these specific RCM scenarios. For the full details and definitive guidance, please refer to the attached notification.