RCM Liability on Delayed Invoices – GST Implications, Goods and Services Tax - GST

[Ramanathan Seshan]

Dear Experts,

Company A took a premises on rent in January 2025. Due to disputes with the unregistered vendor, rent invoices for February and March 2025 were not raised at the time and were only issued in April 2025. No provision for these expenses was made in the books for FY 2024–25. Additionally, as the vendor is unregistered, Company A is liable to pay GST under reverse charge mechanism (RCM) on the rent. Since the invoices were received only in April 2025, how should this RCM liability be disclosed and paid—can you please throw light of disclosures to be made in GSTR-3B and GSTR-9 and its implications.

Regards,

S Ram

Posts / Replies

[KASTURI SETHI]

Dear M/s.Yagay and Sun,

                Sirs, Circular No.105  stands withdrawn. Moreover, it is not relevant here.

                        Am I right ?   Am I missing something  ? 

                          Pl. throw light on this.

[YAGAY andSUN]

You're absolutely right in noting that CBIC Circular No. 105/24/2019-GST dated 28 June 2019 stands withdrawn by Circular No. 151/07/2021-GST, and in any case, it is not relevant to your current issue. That circular primarily dealt with intermediary services and classification issues, not RCM liability or timing of expense recognition, so it has no bearing on your facts.

Let’s visit this scenario and clarify everything you need to consider — you are not missing much, but there are key angles to confirm your tax and disclosure position.

✅ Restating the Scenario Briefly:

• Company A rented a premises starting Jan 2025.
• Vendor is unregistered — RCM applies on rent (assuming commercial property under Notification No. 13/2017–CT(Rate)).
• Rent invoices for Feb & Mar 2025 were raised only in April 2025 due to disputes.
• No provision was made in books in FY 2024–25.
• You're now evaluating RCM liability, GSTR-3B, and GSTR-9 disclosures, and whether you’ve overlooked anything.

🔍 GST RCM Treatment: What You’ve Captured Correctly

1. Time of Supply under RCM:

Per Section 13(3) (for services under RCM):

Time of supply is the earlier of:

• Date of payment, or
• 60 days from date of invoice

Since invoices were not issued in FY 2024–25, and payment (likely) wasn’t made either, time of supply arose only in April 2025 when invoices were issued.

✅ You are right: RCM liability did not arise in FY 2024–25. It arises in FY 2025–26, based on the facts.

2. GSTR-3B Disclosure:

In the April 2025 GSTR-3B:

• Report taxable value and GST under Table 3.1(d): “Inward supplies liable to reverse charge”
• Claim ITC under Table 4A(3) (assuming used for business)

✅ This is the correct reporting.

3. GSTR-9 Disclosure (FY 2024–25):

Since the RCM liability was not triggered in FY 2024–25 (due to absence of invoice/payment), there is:

• ❌ No need to report the RCM tax liability in Table 4G for FY 2024–25.
• ❌ No need to report ITC in Table 6C or Table 13 for FY 2024–25, since ITC is claimed in FY 2025–26.

✅ This is a key distinction — no GSTR-9 disclosure required in FY 2024–25, since both supply and liability occurred in FY 2025–26.

📌 Additional Points You Might Be Concerned About:

✅ You are not missing any circular, case law, or compliance requirement based on the current facts.

But you should:

1. Ensure proper documentation of the dispute and reason for delayed invoicing — in case of audit.
2. Keep records to justify why RCM liability was deferred (e.g., no invoice, no payment).
3. If any payment was made in FY 2024–25 (e.g., part rent), you must check if RCM was triggered under the "date of payment" rule.

✅ Summary of Correct Approach (Based on Your Case):

Step	Description
📅 FY	RCM liability arises in FY 2025–26, not 2024–25
GSTR-3B	Report in April 2025 return – Table 3.1(d), claim ITC in Table 4A(3)
GSTR-9	No disclosure required in FY 2024–25 GSTR-9
Circular 105	❌ Not relevant here (withdrawn and unrelated)

[YAGAY andSUN]

Below is a draft internal note and a draft auditor communication explaining why the GST under Reverse Charge Mechanism (RCM) on rent for February and March 2025 is being paid in FY 2025–26 instead of FY 2024–25. This can be used for internal compliance documentation and shared with statutory/tax auditors.

📄 Internal Note: GST RCM Liability on Rent – Timing of Payment

Subject: Timing of GST Payment under Reverse Charge Mechanism on Rent – FY 2025–26
Prepared by: Finance Department
Date: [Insert Date]
Company: [Company A Pvt. Ltd.]

1. Background:

Company A entered into a rental arrangement for commercial premises starting January 2025. The vendor is unregistered under GST, and therefore, Company A is liable to discharge GST on rent under the Reverse Charge Mechanism (RCM) as per Notification No. 13/2017 – Central Tax (Rate).

2. Issue:

Due to commercial disputes with the landlord (vendor), rent invoices for February and March 2025 were not raised during FY 2024–25, and the matter remained unresolved. No rent payments were made for these months either. The dispute was amicably resolved and the vendor issued the pending invoices in April 2025.

3. GST Time of Supply Analysis:

As per Section 13(3) of the CGST Act, 2017, the time of supply of services under RCM is the earlier of:

• The date of payment, or
• 60 days from the date of invoice

In this case:

• No payment was made in FY 2024–25
• Invoices were not issued until April 2025

Therefore, the time of supply arose in April 2025, and accordingly, the RCM liability is payable in FY 2025–26.

4. Accounting & Compliance Treatment:

• GST under RCM for Feb and Mar 2025 has been included in the GSTR-3B for April 2025 (filed in May 2025), under Table 3.1(d).
• Corresponding Input Tax Credit (ITC) has been claimed under Table 4A(3), as per eligibility.
• No liability or ITC is reported in GSTR-9 for FY 2024–25, since neither the payment nor the invoice existed in that financial year.

5. Conclusion:

Based on the above legal provisions and facts, the RCM liability on rent for Feb–Mar 2025 has been correctly deferred and discharged in FY 2025–26, and the treatment is in compliance with the GST law. Documentation of the dispute and delayed invoicing is retained on record for verification.

[YAGAY andSUN]

📧 Draft Communication to Auditor / Tax Consultant

Subject: RCM on Rent for Feb–Mar 2025 – Timing of Liability and Disclosure

Dear [Auditor’s/Consultant's Name],

We would like to bring to your attention the treatment adopted by the Company regarding GST under Reverse Charge Mechanism (RCM) for the premises rented from an unregistered vendor starting January 2025.

Due to unresolved commercial issues, no invoices for February and March 2025 were issued during FY 2024–25, and no rent payments were made for these months. The vendor only issued the pending invoices in April 2025, after resolution of the matter.

In view of Section 13(3) of the CGST Act, the time of supply under RCM is the earlier of payment or 60 days from the date of invoice. Since both payment and invoice issuance occurred in April 2025, the RCM liability legally arises in FY 2025–26.

Accordingly:

• GST was paid under RCM in the April 2025 GSTR-3B, filed in May 2025
• ITC was claimed in the same return
• No disclosures were made in GSTR-9 for FY 2024–25, as there was no obligation or crystallized liability in that year

This position is supported by GST law and documented facts, and we have retained internal memos and vendor communications for audit support.

Please let us know if any further clarification or disclosure is needed.

Best regards,
[Your Name]
[Your Designation]
[Company A Pvt. Ltd.]