{"id":3981,"date":"2020-03-20T06:27:19","date_gmt":"2020-03-20T06:27:19","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3981"},"modified":"2020-03-20T06:27:19","modified_gmt":"2020-03-20T06:27:19","slug":"reverse-charge-in-gst","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/reverse-charge-in-gst\/","title":{"rendered":"REVERSE CHARGE IN GST"},"content":{"rendered":"\n<h2 class=\"has-text-align-center wp-block-heading\"><strong>REVERSE\nCHARGE IN GST<\/strong><\/h2>\n\n\n\n<p>The reverse charge in GST applies to supplies of both goods and services. \u201cReverse charge\u201d&nbsp;means the liability to pay tax by the person receiving&nbsp;goods&nbsp;and\/or services instead of the person supplying the&nbsp;goods&nbsp;and\/or services in respect of such categories of supplies as the Central or a&nbsp;State Government&nbsp;may, on the recommendation of the <a href=\"https:\/\/commerceiets.com\/gst-council\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"GST Council (opens in a new tab)\">GST Council<\/a>. GST council &nbsp;specify reverse charge mechanism in <strong>clause 2(85) of&nbsp;Model&nbsp;<a href=\"https:\/\/commerceiets.com\/gst\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"GST (opens in a new tab)\">GST<\/a> Law, 2016.<\/strong><\/p>\n\n\n\n<p>Those who are covered under Reverse Charge\nprovisions have to see the following three aspects.<\/p>\n\n\n\n<ol><li>Exemption\nlimit of Rs.20 Lakh is not available.<\/li><li>Registration\nis must from zero point and they have to file all the connected returns.<\/li><li>Pay\nthe required taxes on time and comply with all the rules and regulations of GST\nlaw.<\/li><\/ol>\n\n\n\n<p>The\nprovisions regarding reverse charge are as follows:<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>APPLICABILITY OF REVERSE CHARGE<\/strong><\/p>\n\n\n\n<p><strong>As per Sec 9(4) of <a href=\"https:\/\/commerceiets.com\/cgst\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"CGST  (opens in a new tab)\">CGST <\/a>Act<\/strong>, if a registered person purchases goods\/services from an unregistered dealer (URD) then the registered taxpayer is liable to pay GST on&nbsp;reverse charge basis( only for certain goods\/services &amp; registered persons). All the provisions of the Act will apply to such recipient as if he were the person liable for paying the tax in relation to the supply of goods or services.<\/p>\n\n\n\n<p>This provision&nbsp;will apply if the below conditions are met:<\/p>\n\n\n\n<ul><li>There should be a supply of goods or services<\/li><li>The supply should be in respect of taxable goods\/services<\/li><li>Supply must be&nbsp;by&nbsp;an unregistered person.<\/li><li>Supply must be&nbsp;to&nbsp;a registered person<\/li><li>Supply must be an intra-state supply as compulsory registration is required for inter-state sales<\/li><\/ul>\n\n\n\n<p>Supply of certain goods or services notified by CBEC\n(Central Board of Indirect Taxes).<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>GOODS\nNOTIFIED UNDER REVERSE CHARGE<\/strong><\/p>\n\n\n\n<p>Goods like Cashew nuts (not shelled \/ peeled), bidi\nwrapper leaves, tobacco leaves, supply of lottery, silk \/ yarn etc. are taxable\nunder reverse charge mechanism i.e., recipient is liable to pay tax.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>SERVICE\nNOTIFIED UNDER REVERSE CHARGE<\/strong><\/p>\n\n\n\n<p>The following categories of services are notified under\nreverse charge mechanism. The recipient of services is liable to pay GST in\ncase of following services.<\/p>\n\n\n\n<ol><li>Supply\nof Services by Goods Transport Agency (GTA) in respect of transportation of\ngoods by road to any factory, society, co-operative society, body\ncorporate,&nbsp;any person registered\nunder GST, partnership firm, casual taxable person.<\/li><li>Supply\nof services by an individual advocate including a senior advocate to any&nbsp;business entity&nbsp;located in the\ntaxable territory.<\/li><li>Services\nprovided by way of Sponsorship to a&nbsp;body corporate or partnership firm.<\/li><li>Services\nsupplied by the central\/State government or local authority to a&nbsp;business entity&nbsp;excluding renting\nof immovable property, services by the department of post, services in relation\nto aircraft or vessel, transport of goods or passengers.<\/li><li>Supply\nof services by a director of a company\/ body corporate to the said&nbsp;company\/body corporate.<\/li><li>Services\nsupplied by an insurance agent to any person carrying on Insurance Business.<\/li><li>Services\nsupplied by a recovery agent to a&nbsp;banking\ncompany or financial institution or NBFC i.e. Non-Banking Financial Companies.<\/li><li>Supply\nof services by an author, music composer, photographer, artist or the like by\nway of transfer or permitting the use of copyright relating to original\nliterary, dramatic, musical or artistic works to&nbsp;publisher, company, producer or the like.<\/li><\/ol>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>TAX\nPAYABLE BY THE E-COMMERCE OPERATOR ON NOTIFIED SERVICES<\/strong><\/p>\n\n\n\n<ul><li>Electronic Commerce Operators (ECO) displays\nproducts as well as services which are supplied by some other person to the\nconsumer on their electronic portal.<\/li><li>The consumers buy such goods \/ services\nthrough these portals.<\/li><li>The actual supplier supplies the selected\nproduct \/ service to the consumer on the selection.<\/li><li>The consideration for the product \/ service\nis collected by the ECO from the consumer and passed on to actual supplier\nafter the deduction of ECO commission.<\/li><\/ul>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>TIME OF SUPPLY FOR GOODS UNDER\nREVERSE CHARGE<\/strong><\/p>\n\n\n\n<p><strong>As per Section 12(3) of the CGST Act, 2017<\/strong> in case of supplies of goods in respect of\nwhich tax is paid or liable to be paid on reverse charge basis, the time of\nsupply shall be the earliest of the following dates, namely :-<\/p>\n\n\n\n<p>(a)\nDate of receipt of goods; or<\/p>\n\n\n\n<p>(b)\nDate of payment as entered in the books of account of the recipient or the date\non which the payment is debited in his bank account, whichever is earlier; or<\/p>\n\n\n\n<p>(c)\nThe date immediately following 30 days from the date of issue of invoice or any\nother document, or similar other document thereof by the supplier.<\/p>\n\n\n\n<p>Provided\nthat where it is not possible to determine the time of supply under clause (a)\nor clause (b) or clause (c), the time of supply shall be the date of entry in\nthe books of account of the recipient of supply.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>TIME OF SUPPLY FOR SERVICES UNDER\nREVERSE CHARGE<\/strong><\/p>\n\n\n\n<p><strong>As per Section 13(3) of the CGST Act, 2017<\/strong> in case of supplies for Services in respect\nof which tax is paid or liable to be paid on reverse charge basis, the time of\nsupply shall be the earliest of the following dates, namely :-<\/p>\n\n\n\n<p>(a)\nThe date of payment as entered in the books of account of the recipient or the\ndate on which the payment is debited in his bank account, whichever is earlier;\nor<\/p>\n\n\n\n<p>(b)\nThe date immediately following 60 days from the date of issue of invoice or any\nother documents, similar other document thereof by the supplier.<\/p>\n\n\n\n<p>Provided,\nwhere it is not possible to determine time of supply by using above methods\nunder clause (a) and clause (b), the time of supply shall be the date of entry\nin the books of account of the recipient of supply.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>INPUT TAX CREDIT UNDER RCM<\/strong><\/p>\n\n\n\n<p>A\nsupplier cannot take Input Tax Credit of GST paid on goods or services used to\nmake supplies on which the recipient is liable to pay tax under reverse charge.<\/p>\n\n\n\n<p>The\nrecipient can avail Input Tax Credit of GST amount that is paid under reverse\ncharge on receipt of goods or services by him.<\/p>\n\n\n\n<p>GST\npaid on goods or services under reverse charge mechanism is available as ITC to\nthe registered person provided that such goods or services are used or will be\nused for business or furtherance of business.<\/p>\n\n\n\n<p>The\nITC is availed by recipient cannot be used towards payment of output tax on\ngoods or services, the payment of tax under reverse charge only on cash.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>COMPLIANCES IN RESPECT OF\nSUPPLIES UNDER REVERSE CHARGE MECHANISM<\/strong><\/p>\n\n\n\n<p>(1)\nAs per Section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules,\n2017, every tax invoice has to mention whether the tax in respect of supply in\nthe invoice is payable on reverse charge. Similarly, this also needs to be\nmentioned in receipt voucher as well as refund voucher, if tax is payable on\nreverse charge.<\/p>\n\n\n\n<p>(2)&nbsp;<strong><em>Maintenance of accounts by registered persons:<\/em>&nbsp;<\/strong>Every registered person is required to keep and maintain records of all supplies attracting payment of tax on reverse charge.<\/p>\n\n\n\n<p>(3)\nAny amount payable under reverse charge shall be paid by debiting the\nelectronic cash ledger. In other words, reverse charge liability cannot be\ndischarged by using input tax credit. However, after discharging reverse charge\nliability, credit of the same can be taken by the recipient, if he is otherwise\neligible.<\/p>\n\n\n\n<p>(4)\nInvoice level information in respect of all supplies attracting reverse charge,\nrate wise, are to be furnished separately in column 4B of GSTR-1.<\/p>\n\n\n\n<p>(5)\nAdvance paid for reverse charge supplies is also leviable to GST. The person\nmaking advance payment has to pay tax on reverse charge basis.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>PROFIT &amp; LOSS ITEMS WHICH MIGHT ATTRACT GST UNDER RCM<\/strong><\/p>\n\n\n\n<p>Following is an example of some\nexpenses which can attract GST under Reverse Charge Mechanism:<\/p>\n\n\n\n<ul><li>Rent<\/li><li>Commission payments<\/li><li>Printing and stationery<\/li><li>Repairs and Maintenance<\/li><li>Office Maintenance<\/li><li>Vehicle maintenance<\/li><li>Computer maintenance<\/li><li>Legal Fees<\/li><li>Consultancy Fees<\/li><li>Professional Fees<\/li><li>Audit Fees<\/li><li>Freight and transportation expenses.<\/li><li>Gift expenses<\/li><li>Business promotion expenses<\/li><li>Advertisement<\/li><\/ul>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>EXCEPTIONS<\/strong><\/p>\n\n\n\n<p>For these items, RCM will not\napply for the simple reason that GST is not applicable on these:<\/p>\n\n\n\n<ul><li>Salary and wages<\/li><li>Electricity<\/li><li>Interest<\/li><li>Car fuel (Diesel\/petrol)<\/li><li>Government Fees (such as MCA\n     fees, land registration fees etc.)<\/li><\/ul>\n\n\n\n<p><strong>Examples:<\/strong><strong><\/strong><\/p>\n\n\n\n<p><strong>A registered person hires an auto rickshaw for commuting from one place to another.&nbsp;<\/strong><\/p>\n\n\n\n<p>This section will not apply as\nthe transportation of passenger by auto rickshaw is exempted from GST.<\/p>\n\n\n\n<p><strong>A registered person stays in a budget hotel whose tariff is Rs. 800 per day. <\/strong>Since the room tariff is less than \u20b91,000 it is exempted from GST. The question of RCM does not arise.<\/p>\n\n\n\n<p class=\"has-orange-background-color has-background\"><strong>EFFECT OF RCM ON BUSINESS HOUSES<\/strong><\/p>\n\n\n\n<p>This will increase working\ncapital, compliances, classification disputes etc. for registered businesses.\nRegistered businesses may prefer to deal with other registered dealers only to\nease business processes and reduce complications. <\/p>\n\n\n\n<p>This could hamper the business of unregistered dealers. In order to maintain market share, they might be required to voluntarily register or at least assist their registered customers in GST compliance (such as identify HSN Codes, applicable GST rates etc.)<\/p>\n\n\n\n<p><strong>JOIN THE CHANNEL ON TELEGRAM<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/t.me\/commerceiets\" target=\"_blank\">https:\/\/t.me\/commerceiets<\/a><\/p>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study:<\/strong><\/td><td><strong>Also Study:<\/strong><\/td><td><strong>Also Study:<\/strong><\/td><td><strong>Also Study:<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/features-of-gst\/\">GST and its features<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/history-of-gst\/\">History of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/advantages-of-gst-in-india\/\">Advantages of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/disadvantages-of-gst\/\">Disadvantages of GST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/constitutional-aspect-of-gst\/\">Constitutional aspects of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/liability-of-tax-payer\/\">Liability of tax payer<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/objectives-of-gst\/\">Objectives of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/what-is-igst\/\">IGST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/cgst\/\">CGST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/gst-council\/\">GST Council<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/utgst-full-form\/\">UTGST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/sgst\/\">SGST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/levy-and-collection-of-gst\/\">Levy and collection of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/composition-levy\/\">Composition Levy<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/online-gst-registration\/\">Online GST Registration<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/exemptions-under-gst\/\">Exemptions under GST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/reverse-charge-in-gst\/\">Reverse Charge in GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/taxable-supply\/\">Taxable supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/time-of-supply\/\">Time of supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/value-of-supply\/\">Value of supply<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/place-of-supply\/\">Place of supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/inter-state-supply\/\">Inter-state supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/intra-state-supply\/\">Intra-state supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/what-is-composite-supply\/\">Composite supply<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/mixed-supply\/\">Mixed supply&nbsp;<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/composite-and-mixed-supply\/\">Composite and mixed supply<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/online-payment-of-gst\/\">Online payment of GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/how-to-claim-tcs-in-gst\/\">How to Claim TCS in GST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/how-to-claim-tds-in-gst\/\">How to claim TDS in GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/input-tax-credit-under-gst\/\">Input tax credit under GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/tax-invoice-under-gst\/\">Tax Invoice<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/debit-note\/\">Debit Note in GST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/credit-note\/\">Credit Note in GST<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/revised-invoice-in-gst\/\">Revised Invoice in GST<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">Supplementary Invoice<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/e-way-bill-in-gst\/\">E-Way bill in GST<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/gst-returns\/\">GST Returns<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/goods-and-service-tax-network\/\">GSTN (Goods and Service Tax Network)<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/gst-suvidha-provider\/\">GST Suvidha Provider<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/gst-portal\/\">GST Portal<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>REVERSE CHARGE IN GST The reverse charge in GST applies to supplies of both goods and services. \u201cReverse charge\u201d&nbsp;means the liability to pay tax by the person receiving&nbsp;goods&nbsp;and\/or services instead of the person supplying the&nbsp;goods&nbsp;and\/or services in respect of such categories of supplies as the Central or a&nbsp;State Government&nbsp;may, on the recommendation of the GST&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/reverse-charge-in-gst\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;REVERSE CHARGE IN GST&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3982,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[229],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3981"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3981"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3981\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3982"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}