Reverse Charge under GST all Information

Reverse Charge

Reverse Charge under GST

GST Reverse Charge Mechanism

Usually, the supplier of goods or services is responsible for paying GST ( Reverse Charge under GST ). However, in specified cases such as imports and other notified supplies, the responsibility may be cast on the recipient following the reverse charge mechanism. Reverse charge means that the liability to pay tax is upon the recipient of the supply of goods or services rather than on the supplier of such products or services in respect of notified categories of supply.

GST Reverse Charge Mechanism is not applicable under normal circumstances. It is suitable only under the conditions which are specifically mentioned in section 9(3) & 9(4) and are mentioned below. Input tax credit can be availed and utilized in the month of payment of tax.

Reverse Charge

Reverse Charge under GST

Applicability of Reverse charge U/S 9(3)

1. Supplies of goods under reverse charge mechanism

S. no.

Descriptions of goods supplied

Supplier of goods

Recipient of goods

1.

Cashew nuts, not shelled or peeled

Agriculturalist

Any registered person

2.

Bidi wrapper leaves (tendu)

Agriculturalist

Any registered person

3.

Tobacco leaves

Agriculturalist

Any registered person

4.

Supply of lottery

State Government, Union Territory or any Local Authority

Lottery distributor or selling agent

5.

Silk yarn

Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn

Any registered person

Reverse Charge under GST

2. Supplies of services under reverse charge mechanism

S. no.

Descriptions of services supplied

Supplier of services

Recipient of services

1.

GTA Services

Goods Transport Agency (GTA)

Any factory, society, co-operative society, registered person, body corporate, partnership firm, casual taxable person; located in the taxable territory

2.

Legal Services by advocate

An individual advocate, including a senior advocate or a firm of advocates.

Any business entity located in the taxable territory

3.

Services supplied by an arbitral tribunal to a business entity

An arbitral tribunal

Any business entity located in the taxable territory

4.

Services provided by way of sponsorship to any body corporate or partnership firm

Any person

Any body corporate or partnership firm located in the taxable territory

5.

Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding;

(1) renting of immovable property and

(2) services specified below:

 (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;

 (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

 (iii) transport of goods or passengers

Central Government, State Government, Union territory or local authority

Any business entity located in the taxable territory

6.

Services supplied by a director of a company or a body corporate to the said company or the body corporate

A director of a company or a body corporate

The company or a body corporate located in the taxable territory

7.

Services supplied by an insurance agent to any person carrying on insurance business

An insurance agent

Any person carrying on insurance business, located in the taxable territory

8.

Services supplied by a recovery agent to a banking company or a banking company or a financial institution or a non-banking financial company.

A recovery agent

A banking company or a financial institution or a non-banking financial company, located in the taxable territory.

9.

Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like

Author or music composer, photographer, artist, or the like

Publisher, music company, producer, or the like, located in the taxable territory.

Time of supply for reverse charge under GST

The time of supply is the point when the supply is liable to GST. In reverse charge, the recipient is responsible to pay GST. For the levy of reverse charge under GST, it is necessary to determine the time of supply as GST will be required to be deposited with the government within 20 days from the end of the month in which the services were provided.

  • Time of supply of goods is earliest of the following:
    -Date of receipt of goods
    -Date of payment as per the books of account or date of debit in bank account, whichever is earlier
    -The date immediately following thirty days from the date of issue of invoice or similar other documents
  • Time of supply of services is the earliest of the following:
    -Date of payment as per the books of accounts or date of debit in bank account, whichever is earlier
    -The date immediately following sixty days from the date of issue of invoice or similar other documents.

In a case where it is not possible to determine the time of supply using above methods, the time of supply would be the date of entry in the books of accounts of the recipient.

Applicability of Reverse charge U/S 9(4)

As per the section 9(4) of the CGST/SGST Act, 2017, the tax in respect of the supply of taxable goods or services or both by an un-registered supplier, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Whenever a registered person procures supplies from an unregistered supplier, he needs to pay GST on a reverse charge basis. However, supplies, where the aggregate value of such supplies of goods or services or both received by a registered person from any or all the unregistered suppliers is less than five thousand rupees in a day, are exempted.

The provisions of this section will apply to supplies within the same state and not to inter-state supplies as unregistered suppliers can not make them.

Note: A person who is required to pay tax under reverse charge has to compulsorily register under GST and the threshold limit of Rs. 20 lakhs/10 lakhs is not applicable to him.

As per the 22nd, GST Council Meeting held on 6th Oct 2017
Reverse charge is deferred till 31.03.2018.

Read More About GST Refunds

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