All NotificationsGST & ComplianceCentral Board of Indirect Taxes & Customs (CBIC)

CBIC Notification No. 13/2017-Central Tax (Rate) as amended

Reverse Charge Mechanism (RCM under Section 9(3)): Auditing Legal Fees, Director Remuneration & Goods Transport (GTA)

Published: January 24, 20255 min readEffective: Ongoing Statutory Requirement

View Official Gazette / Govt Source Consult Senior Partner

Executive Regulatory Summary

Under the Reverse Charge Mechanism, the recipient of goods or services is liable to discharge GST directly to the government in cash. Detailed breakdown of key corporate RCM touchpoints: advocate legal fees, director sitting fees and commission, Goods Transport Agency (GTA) freight, and commercial property rentals from unregistered landlords.

Key Statutory Takeaways

RCM tax liability MUST be discharged 100% in cash through the electronic cash ledger; ITC balance cannot be used.
Input Tax Credit can be availed on the RCM tax paid in the same tax period, subject to general Section 16 eligibility.
Director remuneration paid to independent or non-executive directors is subject to RCM under Entry 6.
Commercial property rented from unregistered landlords is now brought under mandatory RCM.

Actionable Compliance Checklist for Businesses

Step-by-step advisory measures prescribed by ASGR and CO for immediate adherence:

1Map general ledger expense accounts (legal fees, director commission, freight, rental) to identify RCM applicability.

2Generate self-invoices under Section 31(3)(f) for all transactions procured from unregistered vendors.

3Pay RCM tax in cash under Table 3.1(d) of Form GSTR-3B and claim simultaneous credit under Table 4(A)(3).

4Maintain proof of payment to avert interest exposure under Section 50 during GST audits.

1. Cash Payment Rigor under Reverse Charge

A frequent audit observation by GST authorities is taxpayers using electronic credit ledger balances to pay reverse charge liability. Under Section 49(4), RCM is a direct cash liability; failure to pay in cash attracts 18% mandatory interest even if surplus ITC existed.

Target Entities Governed by this Notification:

Finance Controllers & Internal AuditorsAccounts Payable ManagersCorporate Tax Compliance HeadsChartered Accountants

Advisory Published By

CA Vishal Kanojia

Partner - Audit & Corporate Compliance • B. Com, FCA, Bank Branch Auditor

ASGR and CO, Chartered Accountants (Peer Review Certified: #018Xxx)

Statutory Disclaimer: This publication is compiled by ASGR and CO solely for general informational and educational purposes to assist corporate clients and peers in understanding statutory notifications. It does not constitute legal, tax, or formal secretarial advice. Before acting upon any provisions, specific professional counsel should be sought.

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