Difference between Forward Mechanism Charge (FCM) and Reserve Charge Mechanism (RCM)

Forward Mechanism Charge (FCM)

Forward Mechanism Charge (FCM) is a mechanism in Goods and Services Tax (GST) where a taxpayer has to pay tax in advance to the government on the expected supplies that will be made in the future. It is also called the reverse charge mechanism under GST. This mechanism is applicable to certain categories of taxpayers only.

Features of FCM:

- FCM is applicable to certain categories of taxpayers like casual taxable persons, non-resident taxable persons, and persons registered under the GST composition scheme.
- The taxpayer has to pay tax in advance on the expected supplies that will be made in the future.
- The tax paid under FCM can be claimed as input tax credit (ITC) by the recipient of the supply.
- The tax paid under FCM is deposited in the electronic cash ledger of the government and can be used to pay taxes in the future.

Reserve Charge Mechanism (RCM)

Reverse Charge Mechanism (RCM) is a mechanism in GST where the recipient of the supply is liable to pay tax to the government instead of the supplier. RCM is applicable to certain categories of supplies only.

Features of RCM:

- RCM is applicable to certain categories of supplies like goods or services received from an unregistered dealer, goods or services received from a registered dealer who is exempt from tax, and certain specified goods or services.
- The recipient of the supply is liable to pay tax to the government instead of the supplier.
- The tax paid under RCM can be claimed as input tax credit (ITC) by the recipient of the supply.
- The tax paid under RCM is deposited in the electronic cash ledger of the government and can be used to pay taxes in the future.

Difference between FCM and RCM

- FCM is applicable to certain categories of taxpayers while RCM is applicable to certain categories of supplies.
- FCM is a forward mechanism where the taxpayer pays tax in advance while RCM is a reverse mechanism where the recipient of the supply pays tax to the government instead of the supplier.
- FCM is applicable on the expected supplies that will be made in the future while RCM is applicable on the supplies that have already been received.
- FCM is also called reverse charge mechanism under GST.