What is the GST rate for RCM services?

Understanding Reverse Charge Mechanism (RCM) and GST Rate for Transfer of Development Rights (TDRs)

The Goods and Services Tax (GST) is an indirect tax implemented in India. It has a provision called the Reverse Charge Mechanism (RCM), where the recipient of certain services is responsible for paying GST instead of the supplier.

What is Reverse Charge Mechanism (RCM)?

RCM is a concept in GST where the recipient of specific goods or services becomes liable to pay GST rather than the supplier. This is applicable in cases where tax evasion is a concern, or the supplier is not registered under GST.

GST Rate for RCM Services

The GST rate applicable under RCM varies depending on the type of service provided. However, for specific services, the GST rate is fixed at 18%.

GST on Transfer of Development Rights (TDRs)

TDRs are a form of property right that allows developers to transfer their unused development potential to other sites. In India, the outward supply of TDRs is subject to GST under RCM.

GST Rate for Transfer of TDRs

The GST rate for the outward supply of TDRs between developers is 18%. This means that the recipient of the TDRs is responsible for paying GST at this rate to the government.

Calculating GST on Transfer of TDRs

To calculate the GST payable on the transfer of TDRs, the following formula can be used:

GST = (Value of TDRs * GST Rate) / (100 + GST Rate)

Example

Suppose a developer transfers TDRs worth ₹10 lakhs to another developer. The GST rate applicable is 18%.

GST = (10,00,000 * 18) / (100 + 18)
= ₹1,53,846.15

Therefore, the recipient of the TDRs would be required to pay ₹1,53,846.15 as GST to the government.

Compliance

It is important for businesses engaged in the transfer of TDRs to understand the RCM provisions and comply with the GST regulations. Failure to comply can result in penalties and legal consequences.