Goods Transport Agencies (GTA) are commonly opting for Reverse Charge Mechanism, i.e. When a Goods Transport Agency (GTA) does not discharge the GST liability, the responsibility shifts to the recipient of services. The recipient is obligated to pay GST at a rate of 5% on the services received from the GTA.
BI-C-RIDE LTD, a company engaged in the business of Bicycle & Spares Manufacturing & Trading, is dealing with a GTA that has opted for not to charge GST on their service invoices i.e. RCM. Here responsibility shifts to the recipient of services i.e. BI-C-RIDE LTD.
Accountant has prepared a Standard Operating Procedure (SOP) to be followed by operations team when an Invoice is received from GTA where GST is not charged on Invoice. Important points are highlighted below:-
- Invoice received from GTA without GST charge, accounting treatment is going to be different than other regular invoices with GST charge.
- Since GTA services are utilised by BI-C-RIDE LTD for the purpose of business, an Input Tax Credit shall be availed on such invoices after GST is paid under RCM.
- GST paid under RCM in such cases would be paid without availing normal available Input Tax Credit and hence, credit of GST liability needs to be passed to a special account for complete tracking. Applicable rate is 5% under RCM.
Accounting in the books of BI-C-RIDE LTD & GTA Supplier:
Purchase Orders shall be raised without GST charge.
Invoices shall be received without GST charge.
GST RCM rate applicable would be 5%.
For more on GTA, visit www.gstkanun.in
Real Time business scenarios: https://efinacademy.com/real-time-business-experiences/