Rule 47A of the CGST Rules – Effective from 1st November 2024

The Central Board of Indirect Taxes and Customs has introduced Rule 47A in the CGST Rules, which will be effective from November 1, 2024. This is through Notification No. 20/2024-Central Tax. The new requirements set out for businesses dealing with RCM in GST will come through this rule. The rule states that a self-invoice must be issued within 30 days when they are required to pay GST under RCM. This rule will make documentation less cumbersome and also ensure better compliance for recipients who are liable to pay tax under RCM.

 Rule 47A: Main Provisions

Rule 47A gives a stringent timeline of 30 days to issue tax invoices under RCM. A registered business, while requiring an invoice under Section 31(3)(f) of the CGST Act, shall issue such an invoice within 30 days of receiving goods or services. This provision is also applicable to unregistered suppliers, or in the event of RCM; for instance, services from lawyers or acquisitions by unregistered suppliers. Failure to adhere to this schedule may attract penalties and interest.

Effects of Non-compliance

Those companies that do not meet this 30-day deadline rule of Rule 47A will attract late fees plus interest on the delayed receipt of raising invoices. Which in turn means more liability in all taxable supplies coupled with proper documentation within set timelines.

 Explaining Relevant Sections of CGST Act, 2017

1. Section 31(3)(f): Requires Issuance of Self-Invoice for Supplies in Reverse Charge Mechanism 

It makes clear that if a registered recipient is liable to pay tax under RCM then he has to give the self-invoice but if a recipient liable to pay GST, then an essential document for reporting purpose and also for compliance of tax will be self invoice. Therefore, it keeps registered recipients on its list with the record of taxable transactions to perform the obligations about payment of GST.

2. Section 9(3): Reverse Charge on Notified Goods and Services

Section 9(3) puts certain goods and services under the Reverse Charge Mechanism. This means that in reverse charge, it is the recipient who would be paying the GST rather than the supplier. The government notifies the following for such purposes:

• Legal Services: Advocates provide legal representation to business units.
• Goods Transport Agency (GTA): Supply by a GTA of services in relation to transportation of goods by road to any other business.
• Agricultural Goods: Supply of goods, such as cashew nuts, by an agriculturist.

This chapter shifts the GST liability from the supplier to the recipient in certain cases to make compliance better in industries where the supplier base is diffused or cannot be monitored.

 3. Section 9(4): Reverse Charge on Purchases from Unregistered Persons

Under Section 9(4), a registered entity paying for goods or services from any unregistered supplier is supposed to pay GST under Reverse Charge Mechanism. That is a very important section in case of transactions being done with an unregistered supplier, where the obligation of GST would be maintained, even though the recipient supplier is not registered in GST. For this also, a self-invoice is issued by the purchasing registered recipient, so there will be accurate documentation on the transaction.

4. Section 13: Time of Supply of Services under RCM

Time of supply under section 13 deals with time of supply of services under reverse charge mechanism. Under the subsection 13(3) time of supply, as the case may be shall be earlier of: 

• The date appearing in books of account of recipient or debit of the bank
• Or within 60 days from date of issuance of the invoice by the supplier   
• Date of issuance of a self-invoice as may apply.

This rule ensures timely payment of GST through clearly defined guidelines on when to calculate and when to pay tax.

List of Services under the Reverse Charge Mechanism (RCM) in GST as of October 2024

The following services will attract RCM as of October 2024. This list helps businesses immediately spot the transactions where they would have to pay GST under RCM:

1. Goods Transport Agency (GTA): All the transport of goods by road from GTAs to a business entity except for any government department which is so registered for tax deduction at source only.
2. Legal Services: Service provided by single practicing advocates or law firms to corporate entities.
3. Arbitral Tribunal Services: The service provided by arbitral tribunals to companies are subjected to RCM.
4. Sponsorship Services: Where sponsors are bestowed to corporate organizations or partnership firms
5. Director's Services: Non-remunerative services provided by directors to the company or corporate entity.
6. Insurance and Recovery Agent Services: Insurance agents' services to insurance businesses and recovery agents to financial institutions, including banks and NBFCs.
7. Government Services to Business Entities: This includes services, other than postal, passenger, and goods transport services, rendered by central or state governments to businesses. This includes the letting of immovable property.
8. Transfer of Development Rights and Long-Term Lease: RCM has transfer of development rights and long-term leases under it.

This list makes business understand what service requires it to take on GST liability and provides compliance to be made under RCM.

 Sample Format of Self-Invoice under RCM

A self-invoice under RCM must have the following basic details:

• Invoice Number and Date: Unique for each invoice.
• Supplier's Details: Name and address of the unregistered supplier.
• Recipient's Details: GSTIN, name, and address of the registered recipient.
• Description of Goods/Services: Proper description of the purchased goods or services availed.
• Tax Amount: Applicable GST, comprising CGST, SGST/UTGST, or IGST.
• Total Amount: The total amount of the invoice, with tax.

Following the conventional format also helps ensure self-invoices under RCM are legalistic and aids in keeping records and audits of businesses.

If you are looking for advice on the management of GST services in Bangalore and RCM invoicing tax filing, Mind Your Tax is here to advise you. Our consultants specialize in providing practical and reliable tax solutions to ensure you remain compliant and efficient with your business. Contact us today to simplify your tax obligations and stay ahead of today's dynamic tax environment.