Author: Manthan Experts

What is Reverse Charge Mechanism (RCM) Under GST Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts March 10, 2026 Blog, GST Introduction The Reverse Charge Mechanism (RCM) under the Goods and Services Tax (GST) framework is a taxation concept where the liability to pay tax shifts from the supplier to the recipient of goods or services. Unlike the regular GST system, where the supplier collects and remits tax, RCM ensures tax compliance in specific cases to prevent tax evasion and broaden the tax base. When is Reverse Charge Mechanism (RCM) Applicable? RCM applies in the following scenarios: 1. Notified Goods and Services The government prescribed certain goods or services where Reverse Charge Mechanism applies. Some key examples include: Goods: Cashew nuts (not shelled or peeled) Bidi wrapper leaves (tendu leaves) Raw cotton Supply of lottery, betting, and gambling Silk yarn Services: Legal services provided by an advocate Supply of Services by a Goods Transport Agency (GTA) Director’s remuneration (if not on payroll) Services by an insurance agent Recovery agent services 2. Supply from Unregistered Dealers If any registered person under GST procures any goods or avail any services from an unregistered persons or suppliers, RCM applies on that transactions. This ensures tax compliance on transactions where suppliers of goods or services were not registered under GST. 3. E-Commerce Transactions For certain services provided through e-commerce platforms, the responsibility to pay GST falls on the e-commerce operator instead of the supplier. Examples include: Ride-hailing services (Uber, Ola) Housekeeping services (Urban Clap) Food delivery services (Zomato, Swiggy) for certain restaurant supplies What is Self-Invoicing? Self-billing, also known as self-generated invoicing, is a process where a customer, rather than the supplier, creates and provides an invoice for the goods or services they received. This typically happens when the customer is buying from an unregistered supplier, especially in situations where the Reverse Charge Mechanism (RCM) applies, means the customer is responsible for the payments of GST on behalf of the supplier. Self generated invoices are required when a registered persons procures any goods or avail any services from any unregistered persons under the RCM . Since the supplier cannot raised a GST invoice, the recipient must generate a self-invoice to document the transaction and comply with tax regulations. Example: ABC Ltd. (a registered company) hires a freelance consultant who is not registered under GST. In this case ABC Ltd. In this case, ABC Limited generate self Invoice for Payment of Gst and Claim ITC on this Transactions. Conditions Required under the Reverse Charge Mechanism? Businesses subject to RCM must follow these compliance requirements: Compulsory GST Registration: Any person liable to pay GST under RCM must register under GST, even if their turnover is below the threshold limit. Self Generated Invoices: If any purchases are made from any unregistered suppliers, the recipient must prepare a self generated invoice. Payment in Cash: GST under RCM must be paid from electronic cash ledger as available tax credit cannot be used for the payment of tax liabilities. Proper Documentation: Businesses must maintain the records of invoices, Receipt or Challan Copy of tax payment, and related documents for the requirements of compliance and audit purposes. Time limit for Supply of Goods or Services under the GST of RCM? The Time of Supply determines when the GST liability arises under RCM: For Goods Earliest of the following: The date of receipt of goods The date of payment (if recorded in books within 30 days) The date immediately following 30th days from the date of Invoices. For Services Earliest of the following: The date of payment The date immediately following 60th days from the date of Invoices. If none of the above apply, the date of entry in the recipient’s books of accounts is considered. Is Input Tax Credit Allowed under RCM? Yes, Input Tax Credit (ITC) is allowed on GST paid under RCM, subject to the following conditions: The goods or services must be used only for the business purposes and if availed for any other purposes must return the ITC The recipient must first pay GST from electronic cash ledger under RCM before claiming ITC. Input Tax Credit available for the Tax payment under RCM can be can used to discharges future Tax liabilities. Is there any Exemption under Reverse Charge Mechanism? Yes, there are certain exemptions under RCM: Small Businesses & Composition Dealers: Businesses registered under the Composition Scheme are not required to pay tax under RCM. Exempted Goods & Services: Some supplies, such as agricultural produce, healthcare services, and public transportation, are exempt from GST, meaning RCM does not apply. Latest Amendments in Reverse Charge Mechanism 1. Time of Supply Rules (Effective from November 1, 2024) An amendment to Section 13 of the CGST Act, 2017 was introduced by the GST Council to clarify the time limit for supply of services under RCM. Registered recipients must issue self-invoices within 30 days of receiving goods or services from unregistered persons to claim ITC. Non – fulfilment of conditions for RCM will result in loss of Input Tax Credit. 2. Inclusion of New Services Under RCM (September 9, 2024) The 54th GST Council Meeting held on 09/09/2024 introduced updates to RCM, including: Inclusions of renting of commercial property by an unregistered person to a registered person under RCM to prevent revenue leakage. Expanding e-commerce-related services under RCM. Practical Examples of RCM Application 1. Services by a Director Mr. Sharma, a director of XYZ Pvt. Ltd., receives a sitting fee of ₹50,000. Under RCM, XYZ Pvt. Ltd. is liable to pay GST on this amount since services provided by a director (not on payroll) are covered under RCM. 2. Goods Transport Agency (GTA) Services A registered trader avails transportation services from a GTA for ₹10,000. Since GTA services are notified under RCM, the trader must pay GST on ₹10,000 under RCM and can later claim ITC. Conclusion The Reverse Charge Mechanism… Continue reading What is Reverse Charge Mechanism (RCM) Under GST

Section 31A of GST: Facility of Digital Payment to Recipient Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts   July 14, 2025 GST Introduction Section 31A under the Goods and Services Tax (GST) Act aims to promote digital payments and encourage transparency in business transactions. This section mandates that certain specified taxpayers must provide their customers (recipients) with the option to make payments through digital modes. The objective behind this provision is to reduce cash transactions, improve tax compliance, and ensure that business dealings are more secure and traceable. In this detailed guide, we will cover the scope, applicability, benefits, and compliance requirements related to the facility of digital payment under Section 31A of the GST Act. What is Section 31A of GST? Section 31A of the GST Act was introduced to make it mandatory for specified businesses to offer recipients the option to make payments using prescribed electronic payment modes. This section ensures that businesses provide at least one mode of digital payment to facilitate cashless transactions, thereby supporting the government’s goal of creating a digitally empowered economy. The provision under Section 31A is part of the broader push towards the Digital India initiative, encouraging taxpayers to adopt digital infrastructure for smoother and more transparent business operations. Legal Basis of Section 31A Section 31A was inserted into the GST Act through an amendment to align the GST framework with the growing need for digitization in the Indian economy. It ensures tha recipients (buyers) have the flexibility to make payments electronically, reducing dependence on cash transactions. The Central Government, under its authority, has prescribed specific payment modes that businesses must provide to comply with this requirement. Applicability of Section 31A The facility of digital payment under Section 31A applies to: Registered taxpayers with an aggregate turnover exceeding ₹50 crore in any financial year. Businesses involved in the supply of goods or services to end consumers (B2C transactions). Transactions where an invoice is generated and payment is expected from the recipient. Who is Exempt from Section 31A? ❌ Registered businesses with an annual turnover of ₹50 crore or below. ❌ Composition scheme taxpayers. ❌ Transactions involving business-to-business (B2B) dealings (unless specified otherwise). ❌ Transactions involving non-taxable or exempt supplies. Prescribed Modes of Digital Payment Under Section 31A To comply with Section 31A, businesses must provide at least one of the following electronic payment options: Credit Cards – Visa, Mastercard, RuPay, etc. Debit Cards – Linked to the buyer’s bank account. Unified Payments Interface (UPI) – Including UPI apps like PhonePe, Google Pay, Paytm, etc. National Electronic Funds Transfer (NEFT) Real-Time Gross Settlement (RTGS) Immediate Payment Service (IMPS) Bharat Interface for Money (BHIM) QR Code-Based Payments The chosen payment mode must be clearly indicated on the invoice or displayed at the business premises to inform the recipient about the available options. How to Comply with Section 31A of GST 1. Display of Payment Options Businesses must display the available digital payment methods prominently at their business location. Invoices should mention the accepted digital payment options. 2. Enable Digital Infrastructure Ensure that the payment infrastructure, such as QR codes or card readers, is functional and accessible. Integrate secure payment gateways for online transactions. 3. Maintain Records of Digital Payments Maintain a proper record of all digital payments received. Ensure that payment records match the details reported in GST returns. 4. Include Payment Details in GST Invoices The GST-compliant invoice should mention the available modes of digital payment. Ensure that the invoice format aligns with the prescribed GST guidelines. Example of Section 31A Compliance Example: ABC Enterprises, a registered taxpayer, has an annual turnover of ₹75 crore. A customer visits their store and purchases goods worth ₹5,000. ABC Enterprises provides the customer with the following payment options: UPI (Google Pay) Credit Card QR Code The invoice clearly mentions these available payment options. The customer chooses to pay through UPI, and the payment is recorded in the company’s accounting system. ABC Enterprises successfully complies with Section 31A by: Offering multiple digital payment options. Mentioning payment details on the invoice. Maintaining records of the transaction. Penalties for Non-Compliance with Section 31A Failure to comply with the provisions of Section 31A may result in the following consequences: ❌ Notice from the GST Department – Businesses may receive a notice for non-compliance. ❌ Monetary Penalty – A fine may be imposed for failure to provide digital payment options. ❌ Legal Action – Persistent non-compliance may lead to further action under GST laws. Benefits of Section 31A of GST 1. Promotes Cashless Economy Encouraging digital payments helps reduce cash dependency and improves financial transparency. 2. Enhances Tax Compliance Digital transactions leave an audit trail, making it easier for authorities to verify GST payments and filings. 3. Increases Customer Convenience Providing multiple payment options improves the customer experience and encourages repeat business. 4. Reduces Fraud and Theft Electronic payments minimize the risk of cash-related fraud and theft. 5. Improves Business Credibility Businesses offering secure and transparent payment options gain customer trust and credibility. Challenges in Implementing Section 31A ❌ Technical Issues: Internet connectivity and server downtimes may disrupt payment processing. ❌ Customer Awareness: Some customers may be unfamiliar with digital payment methods. ❌ Payment Gateway Fees: Businesses may need to bear transaction fees for certain payment methods. ❌ Compliance Burden: Businesses must ensure that their payment systems are operational at all times. Frequently Asked Questions (FAQs) 1. Is Section 31A mandatory for all businesses? No, Section 31A applies only to businesses with an annual turnover exceeding ₹50 crore. 2. What happens if a business fails to provide digital payment options? Non-compliance can lead to penalties and notices from the GST department. 3. Can a business provide only one mode of digital payment? Yes, businesses need to offer at least one digital payment mode to comply with Section 31A. 4. Are B2B transactions covered under Section 31A? No, Section 31A primarily applies to B2C transactions. Conclusion Section 31A of the GST Act reflects the Indian government’s commitment to promoting a cashless economy and improving tax compliance.… Continue reading Section 31A of GST: Facility of Digital Payment to Recipient

Understanding Input Tax Credit (ITC) Under GST Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts   July 14, 2025 GST Introduction Section 2(63) of the Central Goods and Services Tax Act, 2017, defines Input Tax Credit (ITC) as the “credit of input tax.” As a cornerstone of India’s GST framework, ITC empowers enterprises to deduct taxes remitted on acquisitions (inputs) from their output tax obligations. This crediting system guarantees taxation solely on the value addition at each phase of the supply network. By doing so, it eliminates the cascading effect of taxes and promotes better tax compliance across the system. However, recent amendments have introduced new conditions and restrictions that businesses need to be aware of to maximize their ITC claims. What is Input Tax Credit (ITC)? Input Tax Credit received on Procurement of Goods and Availment of services help the Registered business to offset their Tax Labilities on the supply of Good and Services. The key principle is that tax paid on inputs should be deductible from the tax collected on sales, thus lowering the overall tax liability. Eligibility Conditions for ITC In order to avail Input Tax Credit (ITC), a taxpayer needs to fulfill the following prerequisites: The individual or entity should be duly registered under the GST regime. The acquired goods or services must be intended for business-related activities. The supplier must have furnished the invoice details in their GSTR-1 return, and the same must be visible in the recipient’s GSTR-2B. The corresponding tax amount should have been remitted to the government by the supplier. The claimant must hold a valid tax invoice or debit note. Documents & Forms Required to Claim ITC A GST-registered taxpayer needs the subsequent records to utilize ITC: A Sales Documents like tax invoice or debit note issued by a GST-registered Suppliers. Bill of Entry (for imports) Documents (Tax Invoice) issued by Input Service Distributor (ISD) Supplier’s Documents like tax invoice required for reverse charge transactions. Payment records as a proof to supplier within 180 days Filing of GSTR-3B & GSTR-2B reconciliation Cases Where ITC Cannot Be Claimed A GST- registered Taxpayer or Assesses is not eligible to avail Input Tax Credit under the following Scenarios: ❌ Goods/services used for personal purposes. ❌ Non-business-related expenses. ❌ Motor vehicles (except for transport, training, or business resale). ❌ Expenses related to food and drinks, outdoor catering services, or club membership fees (unless they form part of a taxable outward supply) are not eligible for ITC. ❌ ITC is generally disallowed for works contract services, with an exception when these services are employed for further supplying taxable works contracts. ❌ ITC on composition scheme taxpayers. ❌ Input Tax Credit cannot be claimed on goods that are lost, pilfered, damaged, or disposed of as obsolete or written off. Input Tax Credit Set-Off Rules Order of GST Liability Settlement via ITC. The sequence for utilizing GST ITC to offset tax dues is as follows: IGST ITC → First applied against IGST liability, then against CGST & SGST in any ratio or proportion. CGST Input Tax Credit → Can be utilized first to offset CGST liability, and any remaining balance can be applied against IGST, but not SGST. SGST ITC → Can be used against SGST, then IGST (not CGST). Input Tax Credit cannot be applied towards the payment of interest, penalties, or late fee charges. Latest Amendments in ITC Rules The government has initiated several revisions to the GST’s ITC regulations to bolster clarity and adherence. Some of the key changes are: 1. Restriction on ITC Availment (Rule 36(4)) Previously, taxpayers could avail ITC based on provisional credit even if the supplier had not uploaded invoices. However, as per recent amendments, ITC can now be claimed only when the details are available in GSTR-2B. This amendments ensures that input tax credit is only availed against tax actually paid by the supplier. 2. Input Tax Credit Reversal for Non-Payment to Suppliers of goods or services (Rule 37) If the recipient or Receiver of Goods or services does not settle the payment to the supplier of goods or services within stipulated times of 180 days from the date of the invoice, the Input Tax Credit availed must be reversed. However, if the payment for the goods or services made later, ITC can be reclaimed by the Recipient or Receiver. 3. Input Tax Credit Related on Corporate Social Responsibility (CSR) Activities A recent ruling clarifies that ITC on expenses incurred for CSR activities is not eligible under GST. This means businesses cannot claim credit for tax paid on goods or services used for mandatory CSR compliance. 4. ITC Restrictions for Defaulting Suppliers If a supplier fails to remit the tax, their customers will not be eligible to claim Input Tax Credit on those invoices. This amendment reinforces the need for businesses to deal with compliant vendors and verify their GST filings regularly. 5. Reversal of Input Tax Credit on Exempt and Non-Business Transactions If goods or services are used partly for exempt supplies or non-business purposes, in that case ITC availed earlier needs to be proportionately reversed as per Rule 42 and Rule 43 of the CGST Rules. Impact of These Amendments Improved Compliance: Businesses must verify that suppliers submit their GST returns promptly and settle the required taxes to prevent losing out on ITC. Stricter ITC Claims: The dependency on GSTR-2B for claiming ITC mandates real-time reconciliation of purchase invoices. Increased Working Capital Requirements: ITC reversal due to supplier default or delayed payments affects cash flow. Best Practices for Businesses To navigate these amendments, businesses should: Regularly reconcile purchase invoices with GSTR-2B. Guarantee prompt payments to vendors to prevent the clawback of ITC. Maintain proper records and documents like tax invoices and GST returns. Verify supplier’s compliance with GST law and regulations before transactions. Conclusion Understanding and complying with the latest ITC rules is essential for businesses to optimize tax benefits… Continue reading Understanding Input Tax Credit (ITC) Under GST

What Are GST Returns? Types of GST Return Forms, Filing Dates Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts   July 14, 2025 GST Introduction GST Returns are forms that businesses registered under the Goods and Services Tax (GST) system must file periodically to report their sales, purchases, output GST, input tax credit (ITC), and other tax-related information. These data helps the governments to track and manage the collection of taxes also the shows the Contributions in the GDP the Country as well as state. A comprehensive summary of the different GST return formats, their required submission timeframes, and the corresponding compliance duties for businesses. Types of GST Returns Within India’s Goods and Services Tax (GST) framework, enrolled firms and taxpayers must submit various categories of GST filings depending on their business type, turnover, and registration type. Below are mentions the types of return which required to be submit or file by the registered persons. GSTR-1 – Details of Outward Supplies Who Files: Registered taxable supplier Filing Interval: Monthly submissions required (with quarterly filing options available for taxpayers who qualify under the Quarterly Return Monthly Payment scheme). Purpose: To declare specifics of all external provisions (sales) of merchandise and services. Encompasses information such as individual sales invoices, debit memos, and credit memos. Scheduled Dates: Deadline for Monthly Submitters: The eleventh day of the subsequent month. For those submitting under the Quarterly Return Monthly Payment system: Due by the 13th of the month following the quarter’s conclusion. GSTR-2A – Auto-Generated Purchase Return Who Files: No manual filing required (auto-generated) Frequency: Monthly Purpose: This is a view-only record displaying particulars of incoming acquisitions (purchases) automatically populated from the vendor’s GSTR-1. Used for input tax credit (ITC) reconciliation. GSTR-2B – Static ITC Statement Who Files: No manual filing required (auto-generated) Periodicity: Monthly (Accessible from the fourteenth of each month). Purpose: Provides a consolidated view of eligible and ineligible Input Tax Credit (ITC). Helps businesses claim ITC accurately. GSTR-3B – A consolidated return summarizing external and internal provisions. Who Files: Registered taxpayer Frequency: Required on a monthly basis (with quarterly options available for businesses registered under the QRMP program). Purpose: An overview of sales, purchase tax credit claimed, and the tax liability. Payment of tax liability. Due Dates: For Monthly Filers: 20th of the Subsequent or Next Month. For QRMPS Filers: 22 or 24 of the Subsequent or Next Month of Quarter End. GSTR-4 – Tax return submission required for businesses operating within the Composition Scheme framework. Who Must File: Taxpayers enrolled in the Composition Scheme. Frequency: Annually Purpose: An overview detailing aggregate business revenue and composition scheme tax liability. Limited reporting requirements compared to regular taxpayers. Due Date: April 30th of the subsequent fiscal year. GSTR-5 – Submitted by Non – Residents. Who Files: Non-resident taxpayers Frequency: Monthly Purpose: Reports sales and purchases made in India by non-resident taxpayers. Payment of tax liability. Due Date: 20th of the following month GSTR-5A – Return for OIDAR Services Who Files: Online Information and Database Access or Retrieval (OIDAR) service providers outside India who provide services in india. Frequency: Monthly Purpose: Particulars of services rendered to unregistered individuals within India. Payment of tax liability. Due Date: 20th of the following month GSTR-6 – Filing for Purchase Tax Credit Distribution Units (ISD). Who Files: Input Service Distributors Frequency: Monthly Purpose: Allocation of purchase tax credit (ITC) across operational units. Reports details of ITC received and distributed to their associates Due Date: 13th of the following month GSTR-7 – Return for TDS Deductors Who Files: Tax Deductors (like government departments) Frequency: Monthly Purpose: Reports details of Tax Deducted at Source (TDS) under GST. TDS certificate is auto-generated after filing. Due Date: 10th of the following month GSTR-8 – Return for E-Commerce Operators Who Files: E-Commerce Operators Frequency: Monthly Purpose: Reports details of supplies made through the E – Commerce platform. Tax collected at source (TCS) under GST on monthly basis. Due Date: 10th of the following month GSTR-9 – Annual Return Who Files: Regular taxpayers Frequency: Annually Purpose: A holistic summary of all GST filings submitted during the fiscal year. Includes data on sales, acquisitions, purchase tax credit (ITC), and tax liabilities. Due Date: 31st December of the subsequent or Next financial year. GSTR-9A – Yearly return for taxpayers under the Composition Scheme. Who Files: Composition Scheme taxpayers (Optional) Frequency: Annually Purpose: Overview of all returns submitted under the Composition Scheme throughout the financial year. Due Date: 31st December of the subsequent financial year. GSTR-9C – Reconciliation Statement Who Files: Taxpayers whose total turnover exceeds ₹5 crore. Frequency: Annually Purpose: Reconciliation of GSTR-9 with audited financial statements of relevant financial year. Certification by a Chartered Accountant (CA) is required. Due Date: 31st December of the subsequent financial year. GSTR-10 – Annual Return Who Must File: Entities whose GST registration status has been terminated or voluntarily relinquished. Frequency: Once Purpose: Reports details of closing stock and final tax liability. Due Date: Must be completed within a three-month timeframe following the cancellation notification or official order. GSTR-11 – Return for UIN Holders Who Must File: Individuals or entities holding a Unique Identification Number (UIN). Frequency: Monthly Purpose: Requests a refund for taxes paid on incoming supplies. Due Date: 28th of the following month Common GST Filing Timelines Overview Key Notes: ✅ ₹50 per day penalty is levied for late filing (₹20 for NIL returns). ✅ Delayed tax payments incur an interest charge of 18% per annum. ✅ Taxpayers enrolled in the Quarterly Return Monthly Payment (QRMP) plan are required to submit GSTR-1 and GSTR-3B on a quarterly basis yet remit taxes every month. Conclusion: Submitting GST returns correctly and promptly is essential to ensure compliance and prevent penalties. Businesses must stay on top of return filing deadlines and ensure all details are correctly reported to prevent tax issues. If you require assistance on filing any specific GST return, Manthan Experts can be your trusted advisor. Contact them at info@manthanexperts.com.to discuss your specific needs and explore how their expertise can benefit your business. Table of Contents Introduction Types of GST Returns GSTR-1 – Details of Outward Supplies GSTR-2A –… Continue reading What Are GST Returns? Types of GST Return Forms, Filing Dates