Reverse Charge Mechanism (RCM) under GST
What is Reverse Charge Mechanism (RCM) Under GST?
Reverse Charge Mechanism appears to be one of the crucial concerns connected with the parlance of GST or goods and services tax. When you come to think of direct as well as indirect tax that would be levied on both service recipient as well as service providers, it becomes imperative on your part to get to know about RCM in full length. You need to compare the RCM with Forward Charge to understand how your transactions (as a service recipient or receiver) come under the purview of RCM.
What is Reverse Charge Mechanism (RCM)?
To give you the gist of RCM or reverse charge mechanism in a nutshell, it is a very particular system or procedure of tax payment where the beneficiary (one who is in receipt of a particular service) would come under the direct reach of the tax limits. In order to sharpen up your corporate level strategic steps and to avoid hassles in the shape of tax related issues you have to take RCM into close consideration.
This vehement change in GST law was supposed to come into play since July 1. However, the law actually came into existence a little later as it was deferred by Government decision. There is no denying that an overhaul of such magnitude has triggered mixed reaction in various circles of the economic world. There are people who renounce the introduction. However, there are segments who are more likely to welcome this initiative with a gleeful state of mind.
Reverse Charge Mechanism (RCM) and Service Tax
While understanding the real implications of RCM you should know that RCM can be applied both directly as well as indirectly. According to the grapevine sources from various government segments, service recipients are going to come under this taxation program. However, there might be variations as well. At times, service providers are also going to come under this taxation program. In both cases, there would be certain norms related to the methods in which the tax programs are going to be levied on various entities.
As you intend to understand the various intricate clauses as well as norms pertaining to reverse charge mechanism, you need to keep two divergent laws in mind. Those two quintessential laws are as follows- sections 68/1 and 68/2. As of now, service taxes are presumed to be in the bracket of 12.36%. If the grapevine sources are to be believed then it is quite evident that the existing rate of tax is going to get uniformly divided between service receivers as well as service providers. This way, it is not going to put any extra pressure on any group among business communities and commoners who happen to be in the receiving end. It is presumed that some more modifications are going to be enacted so that a greater number of people from the society can benefit from this newly introduced scheme in the arena of GST.
ST3 Form Filing
ST3 is a crucial point of consideration in this regard and you need to throw a very careful look at this. While making it sure that you tender your respective share of the RCM taxation to the government (both as service providers as well as service receivers), you should ensure that you make no technical mistakes in the process. Filing up of the ST3 forms would be one decisive steps which will help you evade any sort of technical mistake in the process.
Why Reverse Charge Mechanism (RCM) is Crucial?
It is believed by some economists as well as some staunch business personalities from all over the globe that introduction of this system is going to establish some particularly effective level headedness in the various precincts of the business worlds. As the service taxes are going to be divided between both the service providers as well as service receivers, both the parties are going to be in a win-win situation for sure. No one is going to be whine about illogical price tags being imposed on goods purchased by a wide spectrum of buyers of commercial goods and other forms of goods.
Industry connoisseurs are also of the opinion that the introduction of RCM or reverse charge mechanism is absolutely going to establish a trend of healthy competition in divergent industry verticals. As the crucial taxation is being divided, the price tags are going to get revised as well. It seems that as a close impact of the decision taken by the government, regular purchasers are going to get a lot of relief on each purchase.
Which services come under the banner of Reverse Charge Mechanism (RCM)?
Now, let’s make an introspection of the various service verticals which directly fall under the banner of RCM. Here is a handy list of service industries that you need to cater a close glance at-
How can you pay the Reverse Charge Mechanism (RCM) tax?
If you happen to be a service recipient, you have got two precise options through which you can make a tax payment. You can choose to pay the service tax wholly or partially, whichever options seems to be convenient in your given situation. However, there could be some unforeseen hassles associated with this RCM. Thus, you would always highly advised to go for the advice proffered by a tax consultant. It is going to ease up your situation for sure.
Reverse Charge Mechanism (RCM) Analysis
RCM Analysis should be included in the must do list of your business, if you truly intend to evade all of your tax related concerns and anxieties. If you are adequately armed with the prerequisite know-how that pertains to the domain of RCM along with the entire scenario of GST, it will be a lot easier on your part to exercise proper measures of RCM analysis. It is eventually going to be invigorating and would turn out to be a decisive factor when you are about to implement some strategic steps to improve or perk up your revenue cycles.