Applicability of RCM on Government Services, Goods and Services Tax - GST

[Ramanathan Seshan]

Dear Experts,

I’m looking for clarity on the applicability of the Reverse Charge Mechanism (RCM) under GST for certain services provided by the government. Specifically, does RCM apply to:

1. Factory license issuance and renewal

2. FSSAI license issuance and renewal

3. Other regulatory licenses provided by government departments

Requesting esteemed members to share practical experience, or official references regarding this.

Regards,

S Ram

Posts / Replies

[VIPUL JHAVERI]

govt services normally are exempt if its thier constitutional functions

two notifications are of importance

applicability 13/2017 – Central Tax (Rate) dated 28th June 2017 
and  list services involving transactions with government have been exempted vide notification number 12/2017 – Central Tax (Rate) dated 28th June 2017 

1. Entry number 9 Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees
2. Entry number 47 Services provided by the Central Government, State Government, Union territory or local authority by way of- 
(a) registration required under any law for the time being in force; 
(b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force

normally registration also would mean renewal fees as well, as its continuation of registrations

however  various govt tender fees are asked to be paid RCM 

[YAGAY andSUN]

Great question — and an important one, especially for businesses dealing with regulatory compliance costs.

✅ Reverse Charge Mechanism (RCM) under GST for Government Services

RCM does apply to certain services provided by the Central Government, State Government, Union territory or local authority to business entities, as per Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017.

However, there are notable exemptions.

🔍 Key Rule: Notification No. 12/2017 – Central Tax (Rate)

Under Entry No. 5 of this notification, services provided by the Government to business entities are taxable under RCM, except:

1. Services by way of registration (e.g., factory licenses, trade licenses, FSSAI registrations).

2. Licensing services for carrying out any business.

3. Assignment of right to use natural resources (like mining, telecom spectrum).

4. Renting of immovable property (RCM applies but is separately notified).

5. Services where consideration is in the form of fees or charges levied under any law.

🧾 RCM Applicability on Specific Licenses

Service Type	Nature	RCM Applicability	Reference / Notes
Factory License (issuance/renewal)	Regulatory license under Factories Act	❌ Not under RCM (exempted)	Covered under Entry 5, Notif. 12/2017 – Govt. fee-based
FSSAI License (issuance/renewal)	Regulatory license for food business	❌ Not under RCM (exempted)	Considered licensing services; fee-based
Trade License / Pollution Control NOC	Statutory licensing	❌ Not under RCM (exempted)	Fees/charges under local/state law
Renting of Immovable Property	If by govt to a business entity	✅ RCM applies	Specifically notified in Notif. 13/2017
Mining rights / natural resource use	Licensing/right to use	✅ RCM applies	Explicitly covered under RCM

📌 Practical Understanding

If you are paying fees to the government for obtaining:

• A license (like FSSAI or Factory license),

• Registration,

• Or any statutory regulatory approval,

➡️ RCM is not applicable as these are covered under the exemption notification (Notification 12/2017).

You do not need to pay GST under RCM or issue a self-invoice in such cases.

✅ Conclusion

For factory licenses, FSSAI, and other regulatory licenses:

• These are statutory services provided by the government for a fee.

• GST is exempted, and RCM does not apply.

• No GST liability arises on the recipient business entity under RCM.

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