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Reverse Charge Mechanism under GST

Apr 13, 2020 by CA Suraj Goyal in GST Compliances

Table of Contents

Reverse Charge Mechanism under GST

Section 9(3):

U/S 2(98) of CGST Act Reverse charge is defined as “liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under subsection (3) or sub-section (4) of section 9 or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act”.

The Government may, on the recommendations of the Council, specify categories of supply, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both 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.

Reverse Charge Mechanism (RCM) is an alternative method to collect the tax where the government thinks that the collection of tax through Direct Charge may be difficult or the person may be supplied the goods or services belong to the unorganized sector where the identification and collection will not be easy. Since the RCM is applied on the receiver of the goods or services or both supplied by the supplier of the goods or services or both, the ‘Aggregate Turnover’ or ‘Turnover in a state’ will not include the value of the supply received by the supplier on which RCM shall be applicable. Similarly, the output tax as defined under 2(82) will not include the tax which is paid under RCM.

Below is the list as specified for the supply of goods, in respect of which the central tax shall be paid on reverse charge basis by the recipient of the intra-state supply of such goods. The following table has been extracted from N.N. 4/2017-CT(RATE), dt. 28-6-2017 [and as amended by N.N. 36/2017-CT(RATE) dt. 13-10-2017; NO.43/2017-CT (RATE), dt. 14-11-2017 AND NO.11/2018-CT (RATE), dt. 28-5-2018], provides an insight into the same.

Reverse Charge Mechanism under GST

Below is the list as specified for the supply of services, in respect of which the central tax shall be paid on reverse charge basis by the recipient of the intra-state supply of such goods. The following table, as extracted from N.N. 13/2017-C.T. (RATE), DT. 28-6-2017 (AMENDED BY N.N. 22/2017-C.T (RATE), DT. 22-8-2017, N.N. 33/2017-C.T (RATE), DT. 13-10-2017, N.N. 3/2018-C.T (RATE), DT. 25-1-2018, N.N. 15/2018-C.T (RATE), DT. 26-7-2018, N.N. 29/2018-C.T (RATE), DT. 31-12-2018, N.N. 5/2019-C.T (RATE), DT. 29-3-2019 AND N.N. 22/2019-C.T (RATE), DT. 30-9-2019, N.N. 29/2019- C.T (RATE), DT. 31-12-2019), provides an insight into the same.