SOP 5 for RCM.pdf
Standard Operating Procedure No. 5
for Reverse Charge Mechanism
Transactions under GST
Department of Posts
(PAF Wing)
Standard Operating Procedure for Reverse Charge Mechanism Transactions under GST
In accordance with the provisions of Section 9(3) of the Central Goods and Services Tax (“CGST”) Act, 2017, read with Notification No. 13/2017–Central Tax (Rate) dated 28th June 2017, Department of Posts (“DoP”), being a registered entity under GST, is mandated to discharge GST liability under the Reverse Charge Mechanism (“RCM”) on specified categories of services received, as follows:
S.No.Category of Supply of Services
Supplier of Service
GST
Applicability
SAC Code
GST Rate
1 Transportation of goods by road
through GTA –
where GTA does
not opt to pay
GST
Goods
Transport Agency
(“GTA”)
Taxable
under RCM
996511 IGST @ 5%
(CGST
@ 2.5%
+ SGST
@ 2.5%)
| 2 | Legal services by individual advocate including a senior advocate or firm of advocates | Individual advocate including a senior advocate / Firm of advocates | Exempt for DoP [Notification No. 12/2017– CTR] | - | Not taxable for DoP |
|---|
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3 Services by arbitral tribunal
Arbitral tribunal
Exempt for DoP
[Notification No. 12/2017– CTR]
- Not
taxable
for DoP
4 Renting of
residential dwelling
Any person Taxable under RCM
997211 IGST @ 18%
(CGST
@ 9% +
SGST @
9%)
5 Renting of
immovable property
(other than
residential dwelling)
by unregistered
person
Unregistered person
Taxable
under RCM
997212 IGST @ 18%
(CGST
@ 9% +
SGST @
9%)
| 6 | Services by insurance agent | Insurance agent | Taxable under RCM | 997161 | IGST @ 18% (CGST @ 9% + SGST @ 9%) |
|---|
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7 Security services (supply of security
personnel)
Any person other than a body
corporate
Taxable
under RCM
998529 IGST @ 18%
(CGST
@ 9% +
SGST @
9%)
| 8 | Renting of motor vehicle (passenger transport) – fuel cost included, and supplier does not opt to pay GST | Any person (not a body corporate) not charging CGST @ 6% | Taxable under RCM | 996601 | IGST @ 5% (CGST @ 2.5% + SGST @ 2.5%) |
|---|
This Standard Operating Procedure (“SOP”) is designed to outline the applicable compliance requirements, procedural steps, and assigned responsibilities to ensure uniformity, accuracy, and adherence in handling such rental transactions.
This SOP is divided into two sections based on the supplier’s registration status under applicable laws:
A. When the Supplier is a Registered Person
B. When the Supplier is an Unregistered Person
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Part A: Supplier is Registered Person
1. Invoicing and Documentation
● Suppliers shall issue a valid tax invoice clearly indicating that the transaction is liable to tax under the RCM.
● DoP shall issue a payment voucher when making the payment to supplier.
These documents ensure the Department’s tax credit remains valid and prevents penalties.
2. Payment Process and Input Tax Credit (“ITC”)
● DoP is liable to pay GST under RCM by debiting its electronic cash ledger. ● GST paid under RCM qualifies for ITC if the services used for the Department's business and all ITC conditions are met.
3. Determining Time of Supply
The time when GST is due under RCM is the earliest of:
i. Date recorded in the Department’s books as payment made. ii. Date payment leaves the Department’s bank account.
iii. 61st day from the date of issue of the tax invoice by the supplier. DoP should track these dates carefully to avoid late fees.
4. Reporting RCM TransactionsAs the Department is the recipient of services from registered suppliers, and such services are taxable under the RCM, the Department must ensure proper reporting across various GST returns to maintain compliances to facilitate ITC claims.
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i. Reporting in Form GSTR-1
Although Form GSTR-1 primarily captures outward supplies made by the registered person, Table 13 is specifically designed to report documents issued during the tax period. In the context of RCM:
⮚ DoP must disclose the number of payment vouchers issued during the tax period.
This reporting ensures transparency and traceability of RCM-related documentation, although it does not impact tax liability computation in Form GSTR-1.
ii. Reporting in Form GSTR-3B
Form GSTR-3B is the monthly summary return where RCM liabilities and ITC claims are explicitly reported. The Department must:
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⮚ Report the taxable value and applicable GST on inward supplies liable to reverse charge in Table 3.1(d).
⮚ Claim the eligible ITC on such RCM payments in Table 4A(3), titled “Inward supplies liable to reverse charge.”
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⮚ Discharge the RCM tax liability by debiting the electronic cash ledger in Table 6.1(B), which is auto-populated basis the inputs provided in Form GSTR-3B.
This structured reporting ensures that the tax is duly paid under RCM and that ITC is availed in accordance with Section 16 of the CGST Act, 2017.
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iii. Reporting in Form GSTR-9
Form GSTR-9 is the annual return that consolidates all GST transactions for the financial year. For RCM transactions, the Department must:
⮚ Report the total value of inward supplies received and liable to RCM in Table 4G, which captures such supplies on which tax is payable under reverse charge.
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⮚ Declare the ITC availed on these RCM transactions in Table 6D, which reflects inward supplies received from unregistered persons on which tax was paid and credit was claimed.
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iv. Reporting in Form GSTR-9C
Form GSTR-9C is the reconciliation statement that aligns the figures reported in Form GSTR-9 with the audited financial statements. For RCM transactions:
⮚ DoP must report inward supplies received in Table 9, which captures supplies on which tax is to be paid by the recipient under reverse charge (“RC”).
This ensures that RCM liabilities are reconciled with the financial records and substantiated for audit purposes.
Note: Supplies from unregistered landlords do not appear in Form-2B, so DoP must compute RCM liabilities manually.
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5. Generation of Challan:
The payment of GST under RCM can be made using the electronic cash ledger through the GST portal.
To remit the GST amount:
● Log in to the GST portal.
● Navigate to the “Services” > “Payments” > “Create Challan.” ● Select "Tax Liability under Reverse Charge."
● Enter the GSTIN and the applicable tax period.
● The portal will display the amount of GST payable under RCM based on self-invoices issued.
● Generate the challan and make the payment using available modes (net banking, NEFT/RTGS, etc.).
The payment will reflect in the electronic cash ledger once successfully remitted. Timely payment must be ensured to avoid interest liability under Section 50 of the CGST Act.
Note: A GST challan generated on the GST portal is valid for 15 days from the date of generation.
Key Points:
● If payment is not made within 15 days, the challan becomes invalid. ● A new challan must be generated after the expiry of the original one.
6. Claiming Input Tax Credit under RCM
To claim ITC on RCM-paid GST, the Department must have:
● A valid tax invoice or self-invoice
● Proof that services were actually received
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● Confirmation that GST was paid to the government
● Filed the corresponding GST return under Section 39.
In practice, ITC is to be claimed in the month following the tax payment. 7. Consequences of Missing Deadlines
● Interest under Section 50 on late GST payments.
● Penalties under Section 122 for delayed invoices or short payments.
● ITC paid under RCM must be discharged in cash through the Electronic Cash Ledger; Utilization of ITC of RCM liability would be non-compliant and may attract penal scrutiny.
Part B: Supplier is Unregistered Person
1. Invoicing and Documentation
● DoP shall issue a self-invoice within 30 days of receiving service. ● DoP shall issue a payment voucher when making the payment to supplier.
These documents ensure the Department’s tax credit remains valid and prevents penalties.
2. Payment Process and Input Tax Credit (“ITC”)
● DoP pays the GST under RCM by debiting its electronic cash ledger. ● GST paid under RCM qualifies for ITC if the services used for the Department's business and all ITC conditions are met.
3. Determining Time of Supply
The time when GST is due under RCM is the earliest of:
i. Date recorded in the Department’s books as payment made. ii. Date payment leaves the Department’s bank account.
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iii. Date on which Department issues self-invoice.
DoP should track these dates carefully to avoid late fees.
4. Reporting RCM Transactions
As the Department is the recipient of services from unregistered suppliers, and such services are taxable under the RCM, the Department must ensure proper reporting across various GST returns to maintain compliances to facilitate ITC claims.
i. Reporting in Form GSTR-1
Although Form GSTR-1 primarily captures outward supplies made by the registered person, Table 13 is specifically designed to report documents issued during the tax period. In the context of RCM:
⮚ DoP must disclose the number of self-invoices issued for inward supplies received from unregistered persons.
⮚ Additionally, the number of payment vouchers issued during the tax period must also be reported in Table 13.
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This reporting ensures transparency and traceability of RCM-related documentation, although it does not impact tax liability computation in Form GSTR-1.
ii. Reporting in Form GSTR-3B
Form GSTR-3B is the monthly summary return where RCM liabilities and ITC claims are explicitly reported. The Department must:
⮚ Report the taxable value and applicable GST on inward supplies liable to reverse charge in Table 3.1(d).
⮚ Claim the eligible ITC on such RCM payments in Table 4A(3), titled “Inward supplies liable to reverse charge.”
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⮚ Discharge the RCM tax liability by debiting the electronic cash ledger in Table 6.1(B), which is auto-populated basis the inputs provided in Form GSTR-3B.
This structured reporting ensures that the tax is duly paid under RCM and that ITC is availed in accordance with Section 16 of the CGST Act, 2017.
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iii. Reporting in Form GSTR-9
Form GSTR-9 is the annual return that consolidates all GST transactions for the financial year. For RCM transactions, the Department must:
⮚ Report the total value of inward supplies received and liable to RCM in Table 4G, which captures such supplies on which tax is payable under reverse charge.
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⮚ Declare the ITC availed on these RCM transactions in Table 6C, which reflects inward supplies received from unregistered persons on which tax was paid and credit was claimed.
Accurate reporting in Form GSTR-9 is essential for annual reconciliation and audit readiness, and it ensures that RCM liabilities and ITC claims are properly reflected in records.
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iv. Reporting in Form GSTR-9C
Form GSTR-9C is the reconciliation statement that aligns the figures reported in Form GSTR-9 with the audited financial statements. For RCM transactions:
⮚ DoP must report inward supplies received in Table 9, which captures supplies on which tax is to be paid by the recipient under reverse charge (“RC”).
This ensures that RCM liabilities are reconciled with the financial records and substantiated for audit purposes.
Note: Supplies from unregistered landlords do not appear in Form-2B, so DoP must compute RCM liabilities manually.
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5. Generation of Challan:
The payment of GST under RCM can be made using the electronic cash ledger through the GST portal.
To remit the GST amount:
● Log in to the GST portal.
● Navigate to the “Services” > “Payments” > “Create Challan.” ● Select "Tax Liability under Reverse Charge."
● Enter the GSTIN and the applicable tax period.
● The portal will display the amount of GST payable under RCM based on self-invoices issued.
● Generate the challan and make the payment using available modes (net banking, NEFT/RTGS, etc.).
The payment will reflect in the electronic cash ledger once successfully remitted. Timely payment must be ensured to avoid interest liability under Section 50 of the CGST Act.
Note: A GST challan generated on the GST portal is valid for 15 days from the date of generation.
Key Points:
● If payment is not made within 15 days, the challan becomes invalid. ● A new challan must be generated after the expiry of the original one.
6. Claiming Input Tax Credit under RCM
To claim ITC on RCM-paid GST, the Department must have:
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● A valid tax invoice or self-invoice
● Proof that services were actually received
● Confirmation that GST was paid to the government
● Filed the corresponding GST return under Section 39.
In practice, ITC is to be claimed in the month following the tax payment.
7. Consequences of Missing Deadlines
● Interest under Section 50 on late GST payments.
● Penalties under Section 122 for delayed invoices or short payments. ● ITC paid under RCM must be discharged in cash through the Electronic Cash Ledger; Utilization of ITC of RCM liability would be non-compliant and may attract penal scrutiny.
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