Updated List of Services Under Reverse Charge Mechanism – Effective January 2025

The Reverse Charge Mechanism (RCM) under GST requires the recipient of specified services to pay tax instead of the supplier. Effective January 2025, certain revisions have been introduced. RCM on supply of services as per Under Notification No. 13/2017-Central Tax (rates) and Notification No. 07/2019- Central Tax (Rate)

Note: CBIC has brought supply of metal scarp by any unregistered person to any registered person under RCM vide Notification No. 06/2024-Central Tax (Rate) dated 08.10.2024 

Explanations:

(a)The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

(b) “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013.

(c) the business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services for the purpose of this notification.

(d) the words and expressions used and not defined in this notification but defined in the Central Goods and Services Tax Act, the Integrated Goods and Services Tax Act, and the Union Territory Goods and Services Tax Act shall have the same meanings as assigned to them in those Acts.

(e) A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.

(f) “insurance agent” shall have the same meaning as assigned to it in clause (10) of section 2 of the Insurance Act, 1938 (4 of 1938).

(g) “renting of immovable property” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.’.

(h) Provisions of the Notification No. 13/2017 Central Tax (Rate), in so far as they apply to the Central Government and State Governments, shall also apply to the Parliament, State Legislatures, and w.e.f. 01.03.2023 to Courts and Tribunals.

(i) The term “apartment” shall have the same meaning as assigned to it in clause (e) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2017).

(j) the term “promoter” shall have the same meaning as assigned to it in clause (zk) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2017).

(k) the term “project” shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP);

(l) “the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).

(m) The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP.

(n) “floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built.”

Applicability of RCM on various categories is as under:

Strict Locking of System-Generated Liabilities in GSTR-3B | Latest GST Advisory

The Goods and Services Tax Network (GSTN) has issued an important update regarding the planned implementation of the hard-locking of auto-populated liability in GSTR-3B returns. Here is everything you need to know about this development:

Background and Advisory

On October 17, 2024, GSTN issued an advisory announcing that the ability to edit auto-populated liability in GSTR-3B would be restricted from the January 2025 tax period. This measure was aimed at ensuring greater accuracy and consistency in GST filings by preventing manual alterations to system-generated figures, which are based on GSTR-1 and other relevant data.

Temporary Postponement of Hard-Locking Implementation

Following the advisory, GSTN received several requests from the business community and trade associations seeking more time to adapt to the proposed change. In response to these concerns, GSTN has decided not to implement the non-editable feature from the January 2025 tax period as originally planned.

This decision provides taxpayers with additional time to review their internal systems and processes to align with the upcoming change.

Key Points for Taxpayers

Union Budget 2025: Meet the 5 Key Members of Finance Minister Nirmala Sitharaman’s Budget Team

Finance Minister Nirmala Sitharaman will present Union Budget 2025-26, her eighth consecutive budget, on February 1. Continued spending on infrastructure, welfare schemes, and focus on fiscal prudence will be a challenging task for FM Sitharaman in Budget 2025.

The Union Budget for financial year 2025-26 will be released on the backdrop of GDP growth cooling down to 6.4 per cent in the FY24-25 against 8.2 per cent recorded in FY23-24. Here are the key faces in Finance Minister Nirmala Sitharaman’s Budget 2025 team.

Finance Secretary Tuhin Kanta Pandey

Tuhin Kanta Pandey is presently serving as finance and revenue secretary. Prime Minister Narendra Modi-led government appointed him as revenue department’s secretary months ahead of Union Budget 2025. Pandey will act as the main communication thread between all departments of the Ministry of Finance including Department of Revenue, the Department of Economic Affairs, and the Department of Expenditure.

He is also handling the task of revision of income -tax law, which might be introduced in the upcoming season, reported Economic Times.

CEA V Anantha Nageswaran

Economic Survey is presented a day prior to the presentation of Union Budget 2025, ie on January 31. The document provides a comprehensive overview of the situation of India’s economic sectors including agriculture, industry, services, etc. CEA V Ananta Nageswaran is responsible for overseeing the preparation of Economic Survey 2024-25.

Expenditure Secretary Manoj Govil

Manoj Govil is the secretary of department of expenditure in Nirmala Sitharaman’s Ministry of Finance. Govil is an IIT graduate who has pursued Masters Degree in Public Policy and a PhD in Economics from Princeton University. He is handling key tasks under the Budget 2025 preparation like rationalisation of subsidies and expenditure boost in government-run schemes, reported ET.

M Nagaraju Secretary, Department of Financial Services

M Nagaraju has chaired multiple meetings with public sector lender chiefs to take review various financial inclusion schemes operational in India. As per ET report, his key areas of focus in Union Budget 2025 will include credit flow, deposit mobilisation, fintech regulation, insurance coverage expansion, etc.

Ajay Seth, Secretary of Department of Economic Affairs

Ajay Seth, Secretary of the Department of Economic Affairs, is a Karnataka cadre bureaucrat from the 1987 batch. His career spans over 33 years where he has extensively worked in public finance and taxation for 18 years.

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CBIC has waived the 18% GST on rental income for property owners who are not registered under the GST system.

In a significant development for small taxpayers under the composition scheme, the Central Board of Indirect Taxes and Customs (CBIC) eliminated 18% GST on rent when they lease premises from property owners not registered under GST.

This decision is expected to substantially benefit several restaurants and service providers in the sector.

The GST department previously introduced new regulations regarding GST liability for leased commercial properties, effective from Oct 10, 2024.

These regulations stipulated that tenants registered under GST would need to pay 18% GST through the reverse charge mechanism (RCM) when renting from unregistered property owners.

Industry experts argued that composition scheme participants, particularly restaurants, would struggle with working capital due to the requirement to pay 18% GST without the ability to claim input tax credit (ITC).

Expert said, “The rule created huge working capital issues for tenants who are under the composition scheme. Their turnover is less than Rs 1.50 crore, and their tax liability is 1-6% based on their business type. The 18% GST on RCM created working capital issues for a large number of small traders, manufacturers, and restaurants because they cannot claim ITC for the GST they paid. Now, the CBIC has said that if the dealer under the composition scheme occupies rented premises from an unregistered person, he/she will not have to pay the GST on an RCM basis. This will significantly help the small businesses.”

Expert noted that the CBIC implemented this notification retrospectively from Oct 10, 2024.

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“Notification No. 07/2025 introduces a Temporary Identification Number (TIN) under the GST framework.”

Key Amendments to the Central Goods and Services Tax (CGST) Rules, 2017 – Notification No. 07/2025

The Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 07/2025 – Central Tax on 23rd January 2025, introducing several amendments to the CGST Rules, 2017. These amendments aim to streamline compliance and address practical issues under the GST framework. Below are the detailed highlights of the changes introduced.

Link of Notification

Introduction of Temporary Identification Number (TIN) – Rule 16A:

A new rule, Rule 16A, has been added to the CGST Rules, 2017.This rule facilitates the issuance of a Temporary Identification Number (TIN) to individuals or entities who are not liable for GST registration but are required to make any payment under the provisions of the GST Act.The proper officer can grant the temporary identification number and issue an order in Part B of FORM GST REG-12.

Changes to Rule 19(1): Integration with FORM GST CMP-02:

• Rule 19(1)has been amended to incorporate provisions for composition taxpayers.After the words “FORM GST REG-10,” the rule now includes “or in the intimation furnished by the composition taxpayer in FORM GST CMP-02.”This ensures that composition taxpayers can seamlessly update their registration information, reflecting their decision to opt for or withdraw from the composition scheme.

Update to Rule 87(4): Common Portal and Rule 16A Integration:

• Rule 87(4)has been amended to reflect the addition of Rule 16A.
• After the words “common portal,” the amendment inserts “as per Rule 16A.”
• This ensures that the functionality of issuing Temporary Identification Numbers (TIN) under Rule 16A is integrated with the GST common portal for smooth operational efficiency.

Effective Dates of Amendments

• The amendments shall come into force on the date of their publication in the Official Gazette, except where specified as “a date to be notified.”

Summary of Amendments in Tabular Format

Duplicate Entries in GSTR-2B Addressed – Verify Your ITC Claims: GST Advisory on Reconciliation of GSTR-2B and GSTR-3B.

The GST portal has issued a crucial advisory addressing concerns regarding discrepancies in Input Tax Credit (ITC) reflected in GSTR-2B and GSTR-3B filings. This advisory aims to guide taxpayers on ensuring accurate ITC claims as per the law. The issue of duplicate entries in GSTR-2B has now been rectified, and a corrected GSTR-2B has been generated for taxpayers.

Discrepancies in GSTR-2B

• Previously, certain taxpayers faced issues with duplicate entries in GSTR-2B.
• This issue has been resolved, and the GST system has generated a corrected GSTR-2B statement.

Ensuring Correct ITC Claims

• Taxpayers are advised to cross-verify the ITC values before filing GSTR-3B.
• ITC claims should align with the corrected figures provided in GSTR-2B.

Sources for Verifying ITC

• ITC values can be cross-checked from:
  The auto-drafted ITC statement (downloaded GSTR-2B).
  b. The system-generated GSTR-3B PDF.
  c. ITC observed in the mouse-hover feature of Table 4 in GSTR-3B.

Revised GST Reverse Charge Mechanism (RCM) rules for rental services and sponsorships will come into effect from January 16, 2025.

The GST Council has introduced significant amendments to the Reverse Charge Mechanism (RCM) under Notification No. 13/2017 of Central Tax (Rate), impacting two key entries: Entry No. 5AB and Entry No. 4. These changes, effective from 16 January 2025 through Notification No. 07/2025, are aimed at refining tax compliance and streamlining the scope of reverse charge applicability. The amendments specifically address the categories of services related to the renting of properties other than residential dwellings and sponsorship services, redefining the recipient of services liable under RCM. This article provides a detailed analysis of these updates and their implications.

RCM on Rent: Change in Entry No. 5AB of RCM Notification no.13/2017 of Central Tax Rate

RCM on Sponsorship Services : Change in Entry No. 4 of RCM Notification no.13/2017 of Central Tax Rate

Example 1

Supplier: CA Guruji Events (A business entity – Providing the sponsorship services)

Recipient: Company B (The body corporate – Receiving the sponsorship services)

• Company B, enters into a sponsorship agreement with CA Guruji Events, for promoting its products during an event. The consideration for this sponsorship service is Rs.1,00,000. And the applicable GST rate is 18%.

• Here, this transaction attracts the Reverse Charge Mechanism of GST as Company B being the Recipient of Sponsorship services is a Body Corporate.

• Company B, being the recipient of the sponsorship services, is required to pay the GST on behalf of the supplier, CA Guruji Events (business entity).The GST amount to be paid by Company B would be Rs.1,00,000*18% = Rs.18,000.

• Company B will then self-invoice this transaction and pay the GST to the government.

• So, in this example, Company B, as the recipient, bears the responsibility of paying the GST to the government under the reverse charge mechanism for the sponsorship services received from Company B, Individual or the business entity.

Example 2

Supplier: CA Guruji Events Pvt. Ltd. (A Body Corporate – Providing the sponsorship services)

Recipient: Company B (The body corporate – Receiving the sponsorship services)

Company B, enters into a sponsorship agreement with CA Guruji Events Pvt. Ltd., for promoting its products during an event. The consideration for this sponsorship service is Rs.1,00,000. And the applicable GST rate is 18%.

CA Guruji Events Pvt. Ltd. being the supplier of the sponsorship services, is required to collect the GST from Company B and pay to the Government under Forward Charge Mechanism.

Watch below video to know the other Recent Changes from 16 January 2025:

In conclusion, the recent changes in Entry No. 5AB and Entry No. 4 of the RCM Notification signify the government’s focus on enhancing the precision of tax applicability. By introducing exclusions for persons under the composition levy and corporate service providers, these amendments aim to ensure a fair and balanced tax regime. Businesses and taxpayers must carefully review their transactions and compliance frameworks to adapt to these modifications, effective from 16 January 2025. Staying informed and implementing necessary changes will be crucial to mitigating any potential liabilities arising under the revised provisions of RCM.

Major relief for GST payers: CBIC revises arrest and bail rules under GST.

Now a Goods and Service Tax (GST) proper officer can’t arbitrarily arrest a GST registered person due to a recent amendment in GST arrest instructions. Moreover, now GST proper officers have to explain to the taxpayers about the ‘grounds of arrest’ and also obtain a written acknowledgement from them about their understanding of the explanation.

The Goods and Services Tax Investigation wing has amended para 4.2.1 of its instruction dated August 17, 2022. Amended para 4.2.1 now reads as follows: “The grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo. Acknowledgement of the same should be taken from the arrested person at the time of service of the Arrest Memo.” A notification intimating this amendment in guidelines for arrest and bail in relation to offences punishable under CGST Act, 2017 was published on January 13, 2025 by Central Board of Indirect Taxes and Customs (CBIC).

Click Here to read the instruction

Read below to find out how this new amendment can help you.

Effective implementation of these guidelines will need awareness among businessmen

According to Experts, “This Instruction is expected to reduce arbitrary detentions, which was used as a coercive tool against taxpayers to admit liabilities. These guidelines will not only promote procedural fairness but also provide a sense of security to businessmen. However, effective implementation of the guidelines would require taxpayers knowing about their rights in the first place.”

Experts say sometimes field officers of GST do not follow these instructions and work arbitrarily.

Expert says, “These instructions are good and need to be abided by the field officers. But the irony is that sometimes these instructions about arrest guidelines are not followed at the ground level.”

Expert says that these amended instructions emphasise that there is a significant difference in the phrase ‘reasons for arrest’ and ‘grounds of arrest’. “The ‘reasons for arrest’ as indicated in the arrest memo are purely formal parameters, whereas the ‘grounds of arrest’ would be required to contain all such details in hand of the Investigating Officer which necessitated the arrest of the accused.”

New arrest and bail rule will allow better defense by GST taxpayers

He highlights how the taxpayer who got arrested can now expect a better defence strategy from his/her lawyer since the reason for arrest has to be explained and a copy of it needs to be given at the time of arrest. “This instruction gives clarity to the taxpayer about why he is being arrested and also gives a chance to his lawyer to prepare a defence strategy before the hearing starts in the court. As per this instruction now the grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo,” he says.

Expert says: “The CBIC had issued guidelines outlining the conditions and procedure relating to arrest and bail for offences under the GST legislations. The procedure provided to inform grounds for arrest to the accused. Now, in furtherance of a recent decision by the Hon’ble Delhi Court, the CBIC has amended the guidelines to mandate that an accused must be informed in writing about the facts and circumstances leading to his arrest. This amendment would allow an accused an opportunity to defend himself against custodial remand and also to seek bail. This reinforces the principles of natural justice, ensuring transparency and safeguarding the rights of individuals against arbitrary actions of the tax department.”

Experts explains the above amended Instruction draws a clear distinction between ‘grounds of arrest’ and ‘reasons for arrest’.

He says while the ‘reasons for arrest’ are general, formal justifications like preventing further offenses, the ‘grounds of arrest’ now refer to specific facts known to the Investigating Officer that directly justify the arrest of an individual. “This shift ensures that taxpayers are protected from arbitrary arrests and are given a fair opportunity to defend themselves, as the grounds must be detailed and not merely a formality. This change enhances transparency and fairness in the arrest process,” he says.

Expert says: “The amendment to the earlier instruction mandates that the ‘grounds of arrest’ must be not only explained to the arrested individual but also furnished in writing as an annexure to the Arrest Memo. This ensures that the accused is aware of the precise allegations and evidence prompting their detention. Moreover, an acknowledgment of receipt from the arrested person must be obtained to confirm that they have been adequately informed.”

Expert adds: “This update to the arrest and bail guidelines seeks to enhance transparency and uphold the legal rights of individuals under the CGST Act, 2017. It reflects a broader commitment to procedural fairness and the protection of individual liberties, aligning administrative practices with judicial expectations. By mandating detailed communication of the grounds for arrest, the instruction aims to prevent arbitrary detentions and reinforce the principles of justice and accountability in law enforcement practices.”

When can a GST registered person be arrested?

According to Expert, arrest under the GST legislations is only permissible where there is clear evidence of the intent to evade tax or commit acts leading to availment or utilisation of wrongful Input Tax Credit (ITC) or fraudulent claim or refund of tax.

“The decision to arrest also depends on various factors such as the possibility of tampering with evidence or intimidating or influencing witnesses, to ensure proper investigation. Honest mistakes, or cases of difference of opinion with the tax department cannot lead to arrests,” says Expert

Expert says, “A person can be arrested under CGST law for committing serious offenses such as tax evasion, issuing fake invoices, fraudulently claiming ITC, in contravention of GST law, especially if the amount of tax involved is more than Rs 2 crore.”

Why GST department issued such an amendment in arrest guidelines

Expert explains that prior to this new amendment in GST arrest guidelines the commissioner was recording reasons of arrest but the arrested person was only provided with formal reasons which did not detail out the allegations against him.

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Extension Announced for Implementation of HSN Reporting in GSTR-1 Table 12.

In a significant update for taxpayers, the GST portal has issued a new advisory on the mandatory mentioning of HSN (Harmonized System of Nomenclature) codes in GSTR-1 and GSTR-1A. Initially announced on January 9, 2025, with an implementation date from the January 2025 tax period, this advisory has now been revised. The updated advisory, issued on January 22, 2025, states that the implementation will commence from the February 2025 tax period.

Key Highlights of the New Advisory

Phase-III of HSN Code Implementation:
After the successful roll-out of Phase-I and Phase-II, Phase-III is being introduced for Table 12 of GSTR-1 and GSTR-1A. This phase brings critical changes aimed at enhancing the accuracy and ease of reporting HSN details in GST returns.

Mandatory Selection of HSN from Drop-Down Menu:

• Manual entry of HSN codes has been replaced.
• Taxpayers are now required to select the appropriate HSN code from a drop-down menu.
• This change ensures standardized and error-free reporting of HSN codes.

Bifurcation of Table-12 into Two Tabs:

• Table-12 of GSTR-1 and GSTR-1A has been divided into two tabs:
  • B2B (Business-to-Business) Supplies
  • B2C (Business-to-Consumer) Supplies
• This bifurcation is designed to streamline the reporting process by clearly segregating B2B and B2C supplies.

Validation Mechanism Introduced:

• A validation mechanism has been incorporated for the values of supplies and tax amounts reported in Table-12.
• Initially, these validations will operate in warning mode
• Failing validation checks will not block the filing of GSTR-1 and GSTR-1A, offering taxpayers some flexibility during the initial implementation period.

Key Differences Between the Old and New Advisory

Read GSTN AdvisoryImplementation of mandatory mentioning of HSN codes in GSTR-1 & GSTR 1A

Jan 22nd, 2025

After successful implementation of Phase-I & Phase-II now Phase-III regarding Table 12 of GSTR-1 & 1A is being implemented, from return period February 2025. In this phase manual entry of HSN has been replaced by choosing correct HSN from given Drop down. Also, Table-12 has been bifurcated into two tabs namely B2B and B2C, to report these supplies separately. Further, validation regarding values of the supplies and tax amounts involved in the same, have also been introduced for both the tabs of Table-12. However in initial period these validations have been kept in warning mode only, which means failing the validation will not be a blocker for filling of GSTR-1& 1A. To view the detailed advisory please click hereThanking You,
Team GSTN

“Sponsorship services are exempt from GST under Reverse Charge Mechanism as per Notification No. 07/2025-Central Tax (Rate).”

In alignment with the recommendations of the 55th GST Council Meeting held on December 21, 2024, the CBIC has issued Notification No. 07/2025-Central Tax (Rate) to amend the applicability of the Reverse Charge Mechanism (RCM) for sponsorship services. This amendment alters the tax liability for body corporates by shifting their sponsorship services under the Forward Charge Mechanism (FCM).

Amendment to Serial Number 4 of Notification No. 13/2017

 (A) against serial number 4, in column (3), i.e.  after the words “Any person”, the words “other than a body corporate” shall be inserted.

Explanation of the Changes:

• Original Provision:
  Earlier, any sponsorship services provided to body corporates or partnership firms were taxed under the RCM.
• Revised Provision:
  Sponsorship services supplied by body corporatesare now subject to tax under the Forward Charge Mechanism (FCM).
  • The supplier, if a body corporate, will now be responsible for collecting and depositing GST.
  • Sponsorship services provided by non-body corporateswill continue under RCM.

Implications of the Amendment

For Body Corporates (Suppliers):

• New Tax Responsibility:
  Body corporates supplying sponsorship services must now register under GST (if not already registered) and comply with FCM requirements.
• Invoice Management:
  Body corporates will need to issue GST-compliant invoices and remit tax directly to the government.

For Partnership Firms and Body Corporates (Recipients):

• Reduced Compliance Burden:
  Recipients no longer need to calculate and pay GST under RCM for sponsorship services received from body corporates.

For Non-Body Corporate Suppliers:

• Status Quo Maintained:
  Sponsorship services provided by non-body corporates will continue to be taxed under RCM, where the recipient bears the tax liability.

Regularization Under IGST and UTGST Acts

Similar amendments have been issued under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act). These changes ensure uniformity across different GST frameworks and eliminate potential ambiguities in tax liability for sponsorship services.