RCM One Case Study- Is There Any Solution

Clipped from: https://taxguru.in/goods-and-service-tax/rcm-case-study-solution.html

X & Company during the Financial Year has following sales amount for his mining business :-

Table-1
TURNOVERSGST @5%CGST@5%
1,00,00,000.002,50,000.002,50,000.00
ITC75,000.0075,000.00
Net Tax payable1,75,000.001,75,000.00
Tax paid in Cash1,75,000.001,75,000.00

Note :- The X and Company has paid Royalty to the State Government amounting to Rs. 9,00,000.00 on which he has to pay the RCM and the same was not paid by him.

Now suppose the Dealer has paid the RCM then the situation of this case will be as under :-

X & Company during this year has paid a royalty of Rs. 9 Lakhs to the State Government and RCM payable on this amount @18 % is  as under:-

Table-2
ROYALTYSGST @18%CGST @18%
9,00,000.0081,000.0081,000.00
RCM TO BE PAID IN CASH81,000.0081,000.00
ITC FOR RCM81,000.0081,000.00

IF the dealer has paid RCM then the Tax payment condition is as under:-

Table-3
TURNOVERSGST @5%CGST@5%
1,00,00,000.002,50,000.002,50,000.00
ITC For Inward supplies75,000.0075,000.00
ITC For RCM81,000.0081,000.00
Total ITC1,56,000.001,56,000.00
Net Tax payable94,000.0094,000.00
Tax paid in Cash94,000.0094,000.00
RCM Paid in Cash81,000.0081,000.00
Total Cash Paid By the Dealer1,75,000.001,75,000.00
REMARKSee Cash Paid as Tax by the dealer without paying the RCM in Table -1 is the same as it was in Table-3 and see here there is no financial effect of separately paying the RCM. In this case RCM is only a technical formality.

Now since the Dealer has not paid RCM and now, he has to pay the RCM along with Interest and further since time of taking the ITC is lapsed hence, he will not get the ITC in this respect.

WHAT WAS THE MISTAKE OF THE DEALER

It was just a technical Mistake in the eyes of the Dealer since he has paid all the taxes including the RCM but failed to show the same in it’s return as RCM and taking the ITC of the same but in the eyes of Law it is a big mistake and now it has to pay RCM again with interest without any ITC claim and it is a burden on the dealer for not following a procedure of GST and the law makers should provide a viable solution of this problem instead of burdening the tax payers under huge demands in this respect since non payment of RCM in these type of cases has no financial effects.

Is there any solution of this problem !!

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