In a move to appease small traders, the Central government has postponed the provisions of Reverse Charge Mechanism under GST. RCM was seen as one of the potent weapons for fighting tax evasions under GST. However, there have been indications that the Central Government might refrain from vigorously implementing the norms for some time.
As per tax records, the 1 crore 12 lakh registered traders under GST contribute to 1-80 % of the tax revenues. Small traders constitute the remaining 20% of the tax proceeds. As per government sources, the problems of returns and refunds in GST have not yet been completely done away with. Some teething problems still exist. Hence, bringing the RCM into immediate effect could cause resentment among small traders.
RCM will reportedly check registered traders from buying goods from unregistered dealers. The final decision on RCM will be taken by the GST Council. The Council had also averted the TDS (tax deducted at source) and TCS (tax collected at source) provisions under GST. A final decision on the RCM has been now averted till September 30.
An Alternative Route
Some experts believe that RCM will further complicate the already complex GST provisions and filing procedures. Considering the fact that the proceeds from RCM would be minimal, burdening 90 lakh small traders with RCM compliances does not seem ideal. Hence, alternate options on the matter are being discussed and looked upon.
Read Also: Easy Guide of Reverse Charge Mechanism Under GST with All Aspects
Low Tax Rates
Traders registered under GST Composition Scheme need to 1% tax on an annual turnover of 1 Crore. Small traders under the Composition Scheme need not provide detailed returns. Up to 18 Lakh Traders under Composition Scheme have filed turnover of 15 lakhs only. Hence, even if RCM is brought into effect expecting a great jump in tax proceeds are only castles in the air.
