RCM Timing vs Reporting Year: Where Should Late-Paid RCM Appear in GSTR-9? Explanation with CBIC Clarification
The RCM liability and ITC must be reported in the GSTR-9 of the financial year in which the tax is actually paid and ITC is availed, and not the year to which the underlying supply belongs.
One of the most common and recurring areas of confusion while preparing the GST AnnualReturn ( GSTR-9 ) relates to Reverse Charge Mechanism ( RCM ) transactions, particularly where the RCM liability pertains to one financial year but is actually paid in the subsequent financial year through GSTR-3B. The taxpayers and professionals often struggle with a fundamental question: Should such...
One of the most common and recurring areas of confusion while preparing the GST AnnualReturn ( GSTR-9 ) relates to Reverse Charge Mechanism ( RCM ) transactions, particularly where the RCM liability pertains to one financial year but is actually paid in the subsequent financial year through GSTR-3B.
The taxpayers and professionals often struggle with a fundamental question: Should such RCM liability and the corresponding Input Tax Credit (ITC) be reported in GSTR-9 of the year to which the supply relates, or the year in which the tax is paid?
The settled position under GST Act, supported by CBIC clarification, is clear that the RCM liability and ITC must be reported in the GSTR-9 of the financial year in which the tax is actually paid and ITC is availed, and not the year to which the underlying supply belongs. Accordingly, RCM liability pertaining to FY 2024-25 but paid in FY 2025-26 shall be reported in GSTR-9 of FY 2025-26, along with the corresponding ITC.
Understanding the Issue: Timing Mismatch under RCM
Under Section 9(3) and 9(4) of the CGST Act, the liability to pay GST under RCM shifts from the supplier to the recipient. Unlike forward charge supplies, RCM compliance involves two distinct steps:
- Payment of GST in cash through GSTR-3B
- Availing ITC of the same amount (subject to eligibility)
In many practical situations, especially in cases involving legal services, GTA services, import of services, or late identification of RCM applicability, the taxpayer may miss paying RCM in the correct tax period. When such omission is identified later, the tax is paid in a subsequent financial year, often along with interest.
This creates a timing mismatch between, Year of supply (FY 2024-25), and Year of payment and ITC availment (FY 2025-26).
Legal Position: Reporting Based on Payment Year, Not Supply Year
The GST annual return (GSTR-9) is not a statement that is only based on accruals. Rather, it is mostly determined by the data that was actually reported and paid for throughout the fiscal year using GSTR-3B. In its press release of July 3, 2019, CBIC provided a clear explanation of this principle, which is still the most authoritative explanation available.
CBIC Clarification (Press Release- 3 July 2019)
CBIC clarified as follows:
“Reverse charge in respect of Financial Year 2017-18 paid during Financial Year 2018-19: Since the payment was made during FY 2018-19, the input tax credit on such payment of tax would have been availed in FY 2018-19 only. Therefore, such details will not be declared in the annual return for FY 2017-18 and will be declared in the annual return for FY 2018-19.”
Additionally, if there are any variations in the calculation of turnover on account of this adjustment, the same may be reported with reasons in the reconciliation statement (FORM GSTR-9C).
The rationale adopted by CBIC is clear and unambiguous. Input Tax Credit under the Reverse Charge Mechanism becomes available only upon actual payment of tax. Consequently, where the RCM liability is discharged in FY 2025-26, the corresponding ITC also crystallises in FY 2025-26.
As a result, both the RCM tax liability and the related ITC are required to be reported in the annual return for FY 2025-26. This clarification is of general application and continues to govern subsequent years, including situations involving FY 2024-25 and FY 2025-26.
Correct GSTR-9 Treatment for Late-Paid RCM
GST under the Reverse Charge Mechanism is paid in FY 2025-26, such RCM liability must be reported only in the GSTR-9 of FY 2025-26, under the relevant tables relating to tax paid on reverse charge, strictly in accordance with the figures actually discharged through GSTR-3B.
It should not be reported in the GSTR-9 of FY 2024-25, even if the underlying supply pertains to that year, as the annual return is driven by the year of payment and reporting in regular returns.
Similarly, Input Tax Credit on RCM follows the same principle. Since ITC under reverse charge becomes eligible only after payment of tax and is availed in the GSTR-3B of FY 2025-26, such ITC must also be disclosed exclusively in the GSTR-9 of FY 2025-26. There is no legal or procedural basis to report the ITC in the annual return of the earlier year where the tax itself had not been paid and the credit had neither accrued nor been availed.
Also read: GSTR-9 Audit Checklist: Verification of Table 6A1 vs Table 6H [Access Checklist PDF Here]
Why Reporting Late-Paid RCM in the Earlier Year is Incorrect - Legal & Procedural Issues
When Reverse Charge Mechanism (RCM) tax and the associated Input Tax Credit (ITC) are reported in the GSTR-9 of FY 2024-2025 when the tax has actually been paid in FY 2025-2026, this is not just a technical error but a legislative error that causes numerous legal and reconciliation problems under the GST Act.
Since GSTR-9 is an annual consolidation of returns actually filed during the year, driven primarily by figures reported in GSTR-1 and GSTR-3B, inclusion of RCM tax that was never discharged through GSTR-3B in FY 2024-25 results in an inherent mismatch with GST portal data, often triggering system-based validations, alerts, or queries.
Further, under the Reverse Charge Mechanism, payment of tax is a mandatory pre-condition for availing ITC, and Section 16 of the CGST Act, read with the RCM provisions, clearly prohibits recognition of ITC unless the tax has been actually paid to the Government, consequently, reporting ITC in FY 2024-25 when the RCM tax itself was unpaid during that year amounts to impermissible ITC without payment.
Such incorrect year-wise reporting also significantly increases the risk of departmental scrutiny, audit objections, and notices, particularly due to inconsistencies between GSTR-9, GSTR-3B, and the electronic cash and credit ledgers.
Illustration : Year of Payment Determines GSTR-9 Reporting for RCM
Situation
A registered taxpayer receives legal services in March 2025, which falls in FY 2024-25 and attracts GST under the Reverse Charge Mechanism. However, due to oversight or delayed identification of RCM applicability, the liability is identified only in April 2025. Consequently, the taxpayer discharged the RCM tax of ₹2,00,000 through GSTR-3B for April 2025, which belongs to FY 2025-26. Since ITC under RCM is available only after payment of tax, the taxpayer also avails the corresponding ITC in the same April 2025 return.
Correct Reporting Treatment:
In this situation, the RCM liability and the related ITC must not be reported in the GSTR-9 of FY 2024-25, even though the supply of legal services pertains to that year. This is because neither the tax payment nor the ITC availment occurred during FY 2024-25.
Instead, both the RCM tax paid and the ITC availed should be reported in the GSTR-9 of FY 2025-26, as the annual return is set with the year in which the liability was actually discharged through GSTR-3B and the credit was taken. This method guarantees correct year-by-year reporting in the annual return with RCM rules, and consistency with portal data.
