What is the limit for RCM under GST?

RCM Under GST: Understanding the Exemption from Turnover Limits

The Goods and Services Tax (GST) in India imposes a reverse charge mechanism (RCM) on certain transactions, where the recipient of goods or services is responsible for paying GST. Entities that are subject to RCM are required to register for GST, irrespective of their turnover.

What is RCM in GST?

RCM is a provision under GST where the recipient of goods or services is treated as the supplier and is responsible for paying GST. This is applicable in specific scenarios, such as:

• Import of goods
• Receipt of goods or services from an unregistered supplier
• Receipt of goods or services where the supplier is located in a different state

Registration Limit for RCM Taxpayers

Unlike regular GST taxpayers, who have a turnover threshold for registration, entities obligated to pay tax under RCM must register for GST regardless of their turnover. The standard registration limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states except Jammu & Kashmir) does not apply to RCM taxpayers.

Why is RCM Taxpayers Exempt from Turnover Limits?

The exemption from turnover limits for RCM taxpayers is intended to ensure compliance and prevent tax evasion. Since RCM taxpayers are responsible for paying GST on behalf of the supplier, they are required to be registered with GST to facilitate proper tax collection and administration.

Consequences of Non-Registration Under RCM

Entities that are obligated to pay tax under RCM but fail to register for GST may face penalties and other adverse consequences. This includes:

• Imposition of late fees and interest on unpaid GST
• Suspension of business operations
• Legal action

Conclusion

The exemption from turnover limits for RCM taxpayers under GST is a crucial provision that ensures compliance and prevents tax evasion. Entities subject to RCM must register for GST regardless of their turnover and fulfill their tax obligations to avoid any legal or financial repercussions.

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