What is the Reverse Charge Mechanism (RCM) for Freight Services Under GST in India?

The Goods and Services Tax (GST) in India plays a pivotal role in the taxation of goods and services, and the Reverse Charge Mechanism (RCM) is a critical aspect of this taxation framework. Specifically, RCM applies to certain categories of services, including freight services, under GST. However, as of the last update in August 2023, there is no specific monetary limit set for freight services under RCM. Rather, the liability to pay GST under RCM arises when an unregistered service provider supplies services to a registered recipient. This article explains the applicability, tax rates, payment procedures, and other important aspects of RCM for freight services in India.

Key Points About RCM on Freight Services Under GST

Retailer is liable to pay GST: In situations where the recipient of freight services is registered under GST but the service provider is unregistered, the registered recipient bears the liability to pay GST under RCM. Transport Modes Include: Freight services under RCM apply to transportation by road, rail, air, or sea, with unregistered transporters being subject to this mechanism. Tax Rates Vary: The applicable GST rate for freight services can vary depending on the mode of transport and the nature of the goods being transported. For instance, the rate is 5% for goods transport agency services. Self-Assessment and Payment: The registered recipient must self-assess and pay the GST under RCM while filing their GST returns. Input Tax Credit: Registered recipients can claim input tax credit for the tax paid under RCM, subject to standard conditions.

Specific Consideration Charges for Freight Services

According to certain notifications from the GST Council, there are specified limits for consideration charges where no RCM applies:

Rs. 1,500/-: This limit applies to the cost of transportation of goods on a single consignment transported in a single carriage. If the cost does not exceed Rs. 1,500, then no RCM is required. Rs. 750/-: This limit applies to the transportation of all such goods for a single consignee. If the total transportation cost for all goods to a single consignee does not exceed Rs. 750, then no RCM is required.

These limits are set forth in Notification No. 12/2017-Central Tax, dated 28.06.2017.

Exemption for Goods Transport Agency (GTA)

There are specific exemptions under GST where no RCM is applicable:

Differentiation by Parties: Services provided by a Goods Transport Agency (GTA) to an unregistered person are exempt from RCM under section 93. This means that for such services, RCM does not apply.

This exemption is outlined in Notification No. 32/2017-Central Tax, dated 13.10.2017.

It is advisable to stay informed about the latest notifications and circulars from the GST Council, or to consult a tax professional, to ensure compliance with the most current tax regulations.