Government of Rajasthan issues New clarification on Time Limit in respect of RCM Supplies received from Unregistered Persons

The Department of Commercial Tax, Rajasthan, issued an important notification about how businesses can claim Input Tax Credit (ITC) when dealing with Reverse Charge Mechanism (RCM) supplies from unregistered suppliers on July 9^th 2024.

Key Points :

1. Invoice Issuance and ITC Availment: A registered person can avail ITC based on an invoice issued per clause (f) of sub-section (3) of Section 31 of the RGST Act, subject to tax payment.
2. Invoice Requirement for RCM: When a registered person receives goods or services from an unregistered supplier and is liable to pay tax under sub-sections (3) or (4) of Section 9 of the RGST Act, the recipient must issue an invoice on the date of receipt of the goods or services and pay the tax in cash. If you receive goods or services from an unregistered supplier and are responsible for paying the tax (RCM situation), you must issue an invoice on the date you get the goods or services and pay the tax in cash.
3. Time Limit for ITC Availment: For supplies received from unregistered suppliers under RCM, where the recipient issues the invoice, the relevant financial year for calculating the time limit for ITC availment under Section 16(4) of the RGST Act is the year in which the recipient issues the invoice. The recipient must also ensure the payment of tax on the supply and fulfil other conditions and restrictions under Sections 16 and 17 of the RGST Act. The financial year in which you issue the invoice is the relevant year for calculating the time limit to claim ITC. So, if you issue an invoice for a supply in 2024, that’s the financial year you consider for ITC purposes, not when you actually received the supply.
4. Interest and Penalty for Delayed Invoices: If the recipient issues the invoice after the time of supply and pays tax accordingly, interest on the delayed tax payment will be applicable. Delayed issuance of the invoice may also attract penal action under Section 122 of the RGST Act.  If you issue the invoice late and pay the tax accordingly, you’ll have to pay interest on the delayed tax payment.  Late issuance of the invoice can also lead to penalties under the RGST Act.

This notification ensures clarity on the procedural aspects and time limits for availing ITC on RCM supplies from unregistered persons, emphasizing compliance with invoice issuance and tax payment requirements.