Understanding the New Advisory on RCM Liability and ITC Statements: What Businesses Need to Know
Amit
September 5, 2024
India's GST regime has evolved, with new responsibilities in RCM and ITC tax returns per the latest GST Council advisory. This update is important especially for businesses that require to adhere to the changing GST laws.
What Is the Reverse Charge Mechanism (RCM)?
In reverse charge, the tax burden shifts from supplier to recipient. This is used when the supplier isn't GST registered or for goods/services under reverse charge.
Businesses must analyze transactions to determine RCM coverage per the new advisory. Non compliance attracts penalties and interest charges.
Filing RCM Liability in GSTR 3B
One of the significant components of the advisory is the proper disclosure of RCM liabilities in GSTR 3B return. The GSTR 3B is a return that has to be filed on a monthly basis by the businesses and in this the details of the tax liabilities and the ITC claimed in GSTR 3B.
Therefore, to remain compliant, all parties must accurately report the RCM liabilities in the GSTR 3B returns. This involves confirmation of the invoices and deciding whether the reverse charge applies. This is because, in the process of auditing, inaccurate or omitted entries can cause a lot of problems.
ITC Statement and ITC claimed in GSTR 3B ITC Statement and ITC claimed in GSTR 3B
Starting from August 2024, the authorities have introduced a new “RCM Liability/ITC Statement” to improve accuracy in reporting Reverse Charge Mechanism (RCM) transactions.
This statement will capture RCM liabilities from Table 3.1(d) of GSTR-3B and the related ITC from Tables 4A(2) and 4A(3) of GSTR-3B. Monthly filers must start using it from August 2024, while quarterly filers will begin from the July-September 2024 period.
Any discrepancies between RCM liabilities and claimed ITC should be corrected in this statement, reconciling opening balances up to July 2024 for monthly filers and Q1 FY 2024-25 for quarterly filers. The deadline for declaring and amending the opening balance is October 31, 2024, with three amendments accepted until November 30, 2024.
Why This Advisory Matters
This advisory is therefore a timely reminder for businesses to remain cautious in their approach to GST compliance. New RCM liabilities and the emphasis on accurate ITC tax statements indicate that the authorities want to increase accountability.
Businesses should check their current GST compliance, especially regarding the Reverse Charge Mechanism and the ITC declared in GSTR 3B. Consider regular GST audits or consulting experts to identify potential issues that could lead to complications.
How Book My Accountant Can Help
At Book My Accountant (BMA), we offer GST services where we help you with GSTR 3B filing, reverse charge mechanism, and ITC tax. Our team of professionals keeps abreast with all the current advisories so that your business does not fall foul of any of the GST regulations.
To know more about GSTR 3B filings, you may refer to our comprehensive article on the same here. To get updated with the latest GST updates, please visit the GST Council’s official website here.
Book My Accountant is your one-stop solution for all your GST requirements. Get in touch with us for professional help and make sure your business is always up to date.
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