## General Explanations for RCM Provisions

### Key Definitions

(i) Body Corporate

Any incorporated entity with its own legal existence.
Includes: Company (Indian or foreign), Limited Liability Partnership (LLP).
Excludes: Co-operative society, Partnership firm.

(ii) LLP for RCM purposes

An LLP shall also be considered as a partnership firm for some RCM entries (e.g., DSA entry exclusion).

(iii) Business Entity

Any person carrying out business activities.

### Invoicing Responsibility under RCM

Supplier's Status	Who Issues Invoice?
Supplier is registered under GST	Supplier (issues normal tax invoice; recipient pays tax)
Supplier is unregistered	Recipient (issues self-invoice as per Section 31(3)(f))

### Registration Implications

Rule 1 — Supplier with only RCM outward supplies:

If all goods/services supplied by a person are taxable under RCM (recipient pays), such supplier is NOT required to take registration regardless of turnover.

Example: ABC Ltd. provides only GTA services and turnover crosses ₹ 40 lacs. Since all GTA services are under RCM (when 5% rate opted), ABC Ltd. is not required to register.

Rule 2 — Recipient liable under RCM:

If a person is liable to pay tax under RCM on inward supplies, he is compulsorily required to take registration (regardless of turnover thresholds).

### Critical Takeaways

1. Body corporate vs partnership firm distinction is decisive in many RCM entries.

2. Self-invoicing by recipient is mandatory when supplier is unregistered under RCM.

3. RCM recipient cannot escape registration through turnover threshold.

Worked example

### Example 1

Self-Invoicing Example: Mr. X (unregistered individual) provides legal services to ABC Ltd. (registered). Tax on legal services is payable under RCM by ABC Ltd.

→ Since supplier is unregistered, ABC Ltd. issues self-invoice and pays tax under RCM.

### Example 2

Registration Exemption: A goods transport agency (GTA) opting for 5% rate provides only RCM-covered services with turnover of ₹ 1.2 crores.

→ Not required to register as all outward supplies are under RCM.

### Example 3

Mandatory Registration: Mr. Y has business turnover of only ₹ 5 lacs but pays sitting fees to one director under RCM.

→ Y must register compulsorily because of RCM liability on inward supply (director services).

⚠️ Common exam mistakes

Treating co-operative society or partnership firm as body corporate - they are not
Allowing the recipient under RCM to escape registration through turnover threshold - not permitted
Treating LLP as a company in all contexts - for some entries, LLP is treated as partnership firm
Forgetting self-invoicing requirement when supplier is unregistered under RCM scenarios

Bare-Act text Section 24, Section 31(3)(f) and definitions · CGST Act, 2017 · click to expand

Body corporate has the meaning assigned to it in clause (11) of section 2 of the Companies Act, 2013. A person who is required to pay tax under reverse charge shall take registration under section 24 (compulsorily) irrespective of threshold under section 22. A registered person shall, in respect of supplies of services received from an unregistered supplier on which tax is payable on reverse charge basis, issue an invoice in respect of goods or services or both received by him from the supplier.

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RCM - General Explanations and Procedural Aspects

Worked example

⚠️ Common exam mistakes