GST
Reverse charge tax must be paid in cash
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Facts
Tax under reverse charge must be paid in cash through the electronic cash ledger. ITC cannot be used for it. After paying, you can usually claim it as ITC, subject to the rules.
Provisions and law
- Sec 49(4), CGST Act 2017Electronic credit ledger can be used only to pay output tax, not interest, penalty, fee or reverse charge tax
- Sec 9(3), CGST Act 2017Recipient pays tax on notified supplies under reverse charge
Analysis
Example: a company owes Rs 18,000 RCM on legal fees. It deposits Rs 9,000 CGST and Rs 9,000 SGST in cash, pays it in GSTR-3B, and claims Rs 18,000 as ITC in the same return if eligible. This keeps cash flow neutral over time but needs cash on hand that month.
Conclusion
- Compute RCM liability for the month
- Deposit the amount in cash through PMT-06
- Pay it in GSTR-3B
- Claim ITC on it if eligible
A Savvy can do this for you
GST payment challan, PMT-06
₹999
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