What is the full form of FCM in GST?
The FCM Full Form in GST is Forward Charge Mechanism. The two modes of tax collection for GST in India are the forward charge mechanism and the reverse charge mechanism. In this article, we go on to understand what the FCM is and how it works, as also its benefits and what makes it different from the reverse charge mechanism.
What is the Forward Charge Mechanism (FCM) in GST?
India collects GST via the forward charge mechanism (FCM), commonly known as the usual charge system. Suppliers must deposit tax with the government under FCM.
FCM process:
A provider invoices for goods or services. The transaction and GST rate are on this invoice. Payment arrives to supplier. Price includes GST. GST must be collected from recipients. GST is deposited with the government via GST returns. The FCM helps government-consumer interactions. Providers collect GST for the government.
The FCM has advantages.
FCM simplifies GST compliance for beneficiaries by not calculating or paying GST. They pay the invoice + pre-calculated GST. Registered suppliers must collect and deposit GST, which enhances tax collection and reduces evasion. By obtaining the whole invoice amount, including GST, from the receiver, FCM may boost supplier cash flow. This boosts tax base and formalization.