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CA Intermediate · Taxation · Charge of GST

Raghav Constructions, Nagpur (Maharashtra), a registered person, is liable to pay tax at 18% under reverse charge on legal services of Rs 1,00,000 received from an advocate in Nagpur. Raghav also made taxable outward supplies of Rs 10,00,000 at 18% in the same month. Raghav has input tax credit of CGST Rs 70,000 and SGST Rs 70,000 and no other credit. Which statement about payment of tax for the month is correct?

The reverse charge liability of Rs 18,000 (Rs 9,000 CGST and Rs 9,000 SGST) must be paid in cash through the electronic cash ledger. Tax under reverse charge cannot be discharged using input tax credit, though credit of that tax may be claimed afterwards subject to conditions.

  1. AReverse charge CGST/SGST of Rs 9,000 each may be paid by using the ITC balance in the electronic credit ledger
  2. BReverse charge liability of Rs 18,000 must be paid in cash through the electronic cash ledger, though ITC on it can be claimed later subject to conditionsCorrect
  3. CReverse charge liability is not payable as the advocate is unregistered
  4. DReverse charge liability can be adjusted against ITC of SGST for the CGST portion

Explanation

Tax payable under reverse charge cannot be paid from the electronic credit ledger; it must be paid in cash. Here 18% of Rs 1,00,000 = Rs 18,000 (CGST 9,000 + SGST 9,000). ITC of this tax can be taken subsequently if the services are used for business and conditions are met. Option A is wrong because ITC cannot be used for RCM payments.

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