Hello, in this post we will see the GST reverse charge list expenses on which RCM is applicable and ITC available, except some of the expenses.
Expenses for which GST is not applicable:
| Expenses | Remarks |
|---|---|
| Wages | Employer-employee relationship |
| Salary | Employer-employee relationship |
| Fuel expenses for vehicle | Petroleum products are not covered under GST |
| Interest paid | Except for paid to creditors for goods purchased and services received |
| Bad debts | |
| Loss due to theft/fire | Corresponding ITC on the purchase of material destroyed by fire theft natural calamity etc. should be reduced |
| Electricity expenses | |
| Remuneration to partners | As per the clarification issued |
| Professional Tax | |
| Municipal Taxes | |
| ESIC payments | |
| Discounts shown in bills | |
| Court fee paid | |
| ROC fee |
Expenses for which GST is applicable:
| Expenses | GST applicability | RATE of gst | itc availability for front charge | RCM if from URD | RCM ITC | Remarks |
|---|---|---|---|---|---|---|
| Food to staff entertainment expenses | Applicable | Various | No | Yes | No | 12% in case of non air-conditioned hotels and 18% in case of Air conditioned Hotels (Applicable to take away and delivery) In case of small roadside vendors and unregistered Hotels RCM will be applicable No Input Tax Credit is available on Food and Beverages |
| Conference and seminar expenses | Applicable | 18% | Partially yes | Yes | Partially yes | Tax on Rent of the venue i.e., Banquet will be available as ITC. Tax on Food and Beverages will not be available on ITC. It is advisable to have separate bills for Rent and Food. |
| Printing and stationary | Applicable | 12% and 18% | Yes | Yes | Yes | In case of Tax Paid on stationary and Photocopy / Xerox expenses ITC is available. A diary system with a local stationery shop can be maintained and monthly billing can be done for convenience. |
Travel Expenses |
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| Train tickets | Applicable | 5% for First Class / 3-Tier Ac | No | Since railways are currently not updating GSTIN on the system the ITC will not be available. | ||
| Flight tickets | Applicable | 5% for Economy class | Yes | Yes | Yes | Obtain a copy of Invoice from the airline company. All airline companies have started customer updation programmes please update your GSTIN with airline companies. |
| Hotel Accommodation charges | Applicable | 18 %, 28% | Partially Yes | Yes | Partially Yes | Tax charged on Accommodation in the same state i.e., In the case where the recipient and the hotel are in same state ITC will be available. In the case of Hotels outside the state where GST registration is not there then ITC may not be allowed. Tariff up to Rs 999/: 0% Tax. From 1001 to 2499 Rs 12% Tax From 2500 to 7499 Tax@ 18%. And 7500 and above tax rate will be 28%. |
| Taxi Services such as Tourist vehicle | Applicable | 18% | No | Yes | Such Services are in the negative list | |
Conveyance |
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| Best Bus NMDC TMC Bus Etc | Exemption | No | No | No | ||
| Auto Rickshaw Metered Taxi | Exemption | No | No | No | ||
| Train Pass | Applicable | 5% in case of 1st class | No | No | No | Since railways are currently not updating GSTIN on the system the ITC will not be available. |
| Ola/Uber Radio Taxi | Applicable | 5% | No | Yes | No | Generally bills are sent on mail which should be properly recorded in books of accounts. |
| Courier charge | Applicable | 18% | Yes | Yes | Yes | |
| Repairs to Machinery | Applicable | Various | Yes | Yes | Yes | |
| Repairs to Land and Building | Applicable | Various | No | Yes | No | If repairs are to immovable property then ITC is not available. |
| Insurance Premium Paid | Applicable | 18% | Partially Yes | Yes | Yes | ITC Available except for Life and Medical Insurance. |
| Telephone Expenses | Applicable | 18% | Yes | Yes | Yes | ITC available provided connection in name of the business entity claiming ITC and GSTIN of Business entity mentioned on Bill. |
| Accounts Writing Charges | Applicable | 18% | Yes | Yes | Yes | Generally, such part-time accountants are unregistered and hence will attract RCM and ITC will be available. |
| Transport Charges Like Tempo etc | Applicable | Exempt | No | No | No | Transport Charges are exempt from GST except GTA. Hence booking of private tempo or any other carriage for transport of goods where consignment note is not issued will be exempted. |
| GTA (Compulsory RCM) [Sec 9(3)] | Applicable | 5% | NA | Compulsory RCM 5% | Yes | Compulsory reverse charge is applicable on GTA Services @ 5%. Full ITC is available. Charges to the extent of Rs 750 for multiple carriage and Rs 1500/: for exclusive single carriage is exempt and hence no RCM on such services. GTA means a person who provides service in relation to transport of goods by road and issues consignment note by whatever name called. |
| Hamali Loading Unloading | Applicable | 18% | Yes | Yes | Yes | Majority of Hamali Charges are URD and hence RCM Effect will be there. Set off of tax paid on RCM will be available. |
| Weighment Charges | Applicable | 18% | Yes | Yes | Yes | |
| Packing Expenses (Labour) | Applicable | 18% | Yes | Yes | Yes | |
| Packing Expenses (Material) | Applicable | Various | Yes | Yes | Yes | |
| Legal Expenses (Paid to Advocate or Advocate Firm) [Sec 9(3)] | Applicable | 18% | NA | Compulsory RCM 18% | Yes | Compulsory reverse charge for payment made to advocate or advocate firm. Full ITC of tax paid on RCM is available |
| Testing Charges | Applicable | 18% | Yes | Yes | Yes | |
| Labour Charges | Applicable | 18% | Yes | Yes | Yes | |
| Business Promotion Expenses | Applicable | Various | Yes | Yes | Yes | In case of free gifts sample etc Input Tax Credit will not be available. |
| Professional Fees (Other than Advocate Fee) | Applicable | Various | Yes | Yes | Yes | |
| Internet Charges | Applicable | 18% | Yes | Yes | Yes | |
| Computer Expenses | Applicable | 18% | Yes | Yes | Yes | |
| Security charges | Applicable | 18% | Yes | Yes | Yes | |
| Site Expenses | Applicable | Various | Yes | Yes | Yes | Site Expenses needs to be categorized properly in different heads. This expenses generally have a high quantum of non-invoice and URD Purchases and is very important for RCM. If after categorizing site expenses few expenses pertaining to food beverages etc are found then ITC will not be available. |
| Bank Charges | Applicable | 18% | Yes | Yes | Yes | |
| Bank Guarantee Charges | Applicable | 18% | Yes | Yes | Yes | |
| Rent | Applicable | 18% | Yes | Yes | Yes | |
| Storage and Warehousing | Applicable | 18% | Yes | Yes | Yes | |
| Office expenses | Applicable | Various | Yes | Yes | Yes | Office Expenses needs to be categorized properly in different heads. This expenses generally have high quantum of non invoice and URD Purchases and is very important for RCM if after categorizing site expenses few expenses pertaining to food beverages etc are found than ITC will not be available. |
| Staff Welfare | Applicable | Various | Yes | Yes | Yes | Staff Welfare needs to be categorized properly in different heads. This expenses generally have a high quantum of non-invoice and URD Purchases and is very important for RCM if after categorizing staff welfare expenses few expenses pertaining to food beverages etc are found than ITC will not be available. |
| Auditors Fee | Applicable | 18% | Yes | Yes | Yes | |
| Subscription | Applicable | 18% | Yes | Yes | Yes | |
| Membership Expenses | Applicable | 18% | Yes | Yes | Yes | |
| Commission and Brokerage | Applicable | 18% | Yes | Yes | Yes | It is a high-risk expense chance of URD RCM is more often than not. |
| Liaison Work | Applicable | 18% | Yes | Yes | Yes | It is a high-risk expense chance of URD RCM is more often than not. |
| Liquidated Damages | Applicable | 18% | Yes | Yes | Yes | |
| Exhibition Expenses | Applicable | 18% | Yes | Yes | Yes | |
| Interest paid to Creditors for Taxable Goods/Taxable Service | Applicable | 18% | Yes | Yes | Yes | |
| Exhibition Expenses | Applicable | Rate of goods / services | Yes | Yes | Yes | |
| Advertisement | Applicable | 18% | Yes | Yes | Yes | |
| Motor car Purchase/Rental | Applicable | 28%+ cess | No | Yes | No | The motorcar is in blocked credit list. Hence no Input Credit available |
| Purchase/Rental of the vehicle for Goods Transport | Applicable | 28%+ cess | Yes | Yes | Yes | |
| Purchase of Computer | Applicable | 18% | Yes | Yes | Yes | |
| Purchase of Office Equipment | Applicable | Various | Yes | Yes | Yes | |
| Purchase of office Furniture | Applicable | Various | Yes | Yes | Yes | ITC available on office furniture however if the furniture etc results into the immovable property then no ITC is available |
| Purchase of Cellular Phone | Applicable | 12% | Yes | Yes | Yes | |
| Purchase of Machinery | Applicable | Various | Yes | Yes | Yes | |
Important points to note:
- Remember all ITC is subject to cross-matching of transactions i.e., both the recipient and the supplier should declare such transaction in their respective returns. For a proper recording of the transaction in returns updation of GSTIN in Masters of the supplier is absolutely necessary.
- Exemption for URD RCM of Rs 5000/- per day is provided by way of a notification. You need to take care while taking benefit under this notification as exceeding the limit of Rs 5000/: will trigger liability of full amount including first 5000.
- The above mentioned RCM exemption of Rs 5000/- per day is for supplies received from the unregistered person and will not apply for compulsory RCM like GTA Services and Advocate fees.
- Tax Payable under RCM cannot be collected from the supplier.
- A single self-invoice for the month for all unregistered person purchases may be made. This means that recipient will create Invoice on behalf of the Supplier and showing URD supplier as Seller and Recipient as Buyer.
- Apart from accounts staff, proper care should be taken by the staff preparing such vouchers. Also, you need to ensure that people doing expenses have the company/concern’s GSTIN with them.
- Note that utmost care should be taken by the accounts executive while making entries into books of accounts in case the accounts executive is entering any voucher entry pertaining to expense purchase capital assets etc.
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