Satish Vattam & Alok Agarwal

Satish Vattam & Alok Agarwal

Reverse charge on specified Goods & Services

Section 9(3) of CGST/SGST acts provides that, Government may specify categories of supply of goods or services which shall be paid on reverse charge basis i.e. tax shall be paid by the recipient of such goods or services.  In this regards two notifications have been issued providing the list of goods and services, wherein the purchaser/recipient has the liability to pay GST.

Goods subject to reverse charge – Notification no. 04/2017 dated 28th June 2017

Description of supply of Goods Supplier of goods Supplier of Goods Recipient of supply
Cashew nuts, not shelled or peeled Agriculturist Any registered person
Bidi wrapper leaves (tendu) Agriculturist Any registered person
Tobacco leaves Agriculturist Any registered person
Silk yarn Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn Any registered person
Supply of lottery. State Government, Union Territory or any local authority Lottery distributor or selling agent

Services subject to reverse charge- Notification 13/2017 dated 28th June 2017

Category of Supply of Services Supplier of service Recipient of Service
Supply of Services by a goods transport agency (GTA) Goods Transport Agency (GTA) (a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the 2 Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person. Union Territory Goods and Services Tax Act; or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person; located in the taxable territory
Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority by way of legal services, to a business entity.  An individual advocate including a senior advocate or firm of advocates Any business entity located in the taxable territory
Services supplied by an arbitral tribunal to a business entity. An arbitral tribunal Any business entity located in the taxable territory
Services provided by way of sponsorship to a body corporate or partnership firm.  Any person A body corporate or partnership firm located in the taxable territory.
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.
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.
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.
Services supplied by a recovery agent to a banking company or a financial institution or a nonbanking financial company. A recovery agent A banking company or a financial institution or a non-banking financial company, located in the taxable territory.
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 clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer

 

Author or music composer, photographer, artist, or the like Publisher, music company, producer or the like, located in the taxable territory

Reverse Charge on Procurement by Registered Person from Unregistered Person

Section 9(4) of CGST/SGST Act provides that in case of procurement of goods or services by a registered person from an unregistered person then the registered person shall pay GST on reverse charge basis as if he is the person liable for paying the tax.

This provision of section 9(4) is applicable for all the procurement whether same is for procurement of raw material or any other direct or indirect expenses.

Section 9(4) shall come into play if the below conditions are met:

  • There should be supply.
  • Supply should be in respect of taxable goods or services or both.
  • Supply must be by unregistered person.
  • Supply must be to registered person.

1. If the supply involved exempt goods or services or both this section won’t be applicable.

Examples:

1. A registered person hire auto rickshaw for commuting from one place to another. Section 9(4) would not be applicable since transportation of passenger by auto rickshaw is exempted services.

2. A registered person stay in a hotel whose room tariff is less than Rs. 1,000. Section 9(4) won’t be applicable since services by a hotel having declared tariff less than Rs. 1,000 per day or equivalent is an exempt service.

3. The Section is applicable to intra state taxable supplies only. As per section 24, in case of inter-state taxable supply, registration is mandatory without any turnover limit. So there could not be any taxable supply from unregistered to registered person under reverse charge in case of inter-state.

4. Supplier should be unregistered whether he is liable to registered or not.

5. Recipient should be registered.

Exemption to Section 9(4)

Vide Notification 08/2017 dated 28/06/2017, reverse charge provisions would not be applicable if the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, does not exceed Rs. 5000 in a day

In our view, the above limit of Rs. 5000 is only for taxable supplies by unregistered person. If any exempt supply is procured then such amount shall not be considered for the limit of Rs. 5000.

Registration

All persons  procuring gods/services notified above, on which GST  is payable on reverse charge, have to  be registered mandatorily as per Section 24 (iii) of CGST/SGST law,  irrespective of the threshold.

Time of supply for goods under reverse charge

In case of reverse charge, the time of supply shall be the earliest of the following dates –

  • the date of receipt of goods OR
  • the date of payment OR
  • the date immediately after 30 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply shall be the date of entry in the books of account of the recipient.

Time of supply for services under reverse charge

In case of reverse charge, the time of supply shall be the earliest of the following dates –

(a) The date of payment

OR

(b) The date immediately after 60 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply under (a) or (b), the time of supply shall be the date of entry in the books of account of the receiver of service.

Input tax credit on reverse charge supplies

Tax paid on reverse charge basis will be available for input tax credit if such goods and/or services are used in the course or furtherance of business. The service recipient (i.e., who pays reverse tax) can avail input tax credit

Invoice in case of reverse charge

As per section 31(3)(f), person discharging GST liability under reverse charge under section 9(3) or 9(4) shall issue an invoice in respect of goods or services or both received by him from the supplier. Further as per 31(3) (g) shall issue a payment voucher at the time of making payment to the supplier.

More Under Goods and Services Tax

Posted Under

Category : Goods and Services Tax (3980)
Type : Articles (13662)
Tags : goods and services tax (2545) GST (2130)

56 responses to “Reverse Charge under GST”

  1. Vishvanath A V says:

    While migrating to GST, we have done only for goods, but we had service tax regn also, which was not included. Can we amend now.

  2. s.r.desigan says:

    I am debiting rent for Rs.20000/- per month for my own company, is it apply RCM? How much GST my company has to pay under RCM for rent?

    • Ramani V says:

      input credit will taken from all expenses incurred against sales or other than sales like indirect expenses.

      Hotel room rent< Rs.1000 but extra bed added its come more than Rs.1000/- in this case whether GST applicable or Not if applicable rate of tax

  3. S.K. Maheshwari says:

    i am running a PG having tariff Rs. <1000 per day and paying rent of building to the unregistered owner @ Rs.50000/- per month. My questions are:
    1. Whether I have to charge GST on my tariff.?
    2. Whether I have to pay Reverse charge on the rent paid to the building owner.?

    • Amit Walia says:

      if your are not registered and Total Value of your Supply does not exceed Rs. 20 Lacs, no need to charge GST on Invoice and no need to pay Tax on reverse charge

  4. SURAT SINGH says:

    is a manufacturer or trader of exempt goods is liable to register under GST

  5. Riddhisiddhi says:

    Sir,
    Is supply of agriculture produce by farmer/agriculturist (who is unregistered person) to a person registered under GST liable under Reverse Charge? Will registered person shall pay GST under RCM Sec. 9(4)?
    is there any list of supply of goods &/or services which specifically covers RCM?
    is there any specific notification for the same?

    please guide as soon as possible.
    thanks in advance

    • Amit Walia says:

      Agriculturist being Individual or HUF is exempt from GST Registration U/s 23 for produce cultivated from Land.
      If the supply is a Taxable Supply RCM is applicable on Registered Person from the Agriculturist
      See Notification 4/2017, 12/2017, 13/2017

  6. V K Kataria says:

    ऐसा लगता है कि Tax Guru (सिर्फ़) व्यापारियों के हित के लिये सचमुच उपयुक्त है। उपभोक्ता के लाभार्थ इसमें शायद ही कुछ होता हो!!!!!

  7. mukesh says:

    Thanks for the info.
    My curiosity is RCM really required as it leads to zero tax. It only increases the work load. Records and more records.
    Your expert views Sir.
    Thanking you in advance
    warm regards

  8. prabhakar says:

    only income is say 20.5 lk from commercial building rent, living in same place. will this be CGST/ SGST.
    2)previously i give invoice for ST, collected and paid the government, now should i opt for reverse charge/ composition scheme.
    3)kindly give service category, service heading, service group and service account code for rental from immovable property.

  9. khushi says:

    rent recd is less than rs.20lacs p.a…. so whether gst applicable or not

  10. Navin says:

    a GTA is exempted from taking registration under GST as per the notification mentioning the suppliers falling under reverse charge….my question is if GTA is an unregistered entity then whether section 9(4) section will be applicable to them?????

    • Amit Walia says:

      if GTA provides service to any registered person, registered person is liable to pay Tax, but if GTA provides services to an Unregistered person GTA is not exempt from registration since notification 5/2017 specifically state total tax is payable on reverse charge so if some tax is payable by GTA benefit of notification is not available

  11. B.C.Fernandes says:

    Whether section 9(4) is independent of section 9(3)?

  12. B.C.Fernandes says:

    Whether reverse charge applicable only to goods and services notified by GST council and supported by notification

    • Amit Walia says:

      Section 9(3) is mandatory irrespective of the status of supplier being registered or unregistered but section 9(4) comes into play if supplier is unregistered and supplying taxable supplies

  13. Bharat says:

    Hello Sir plz explain reverse charge invoce format and reverse charge invoice make under sale head ?

  14. Sathyan says:

    What is the logic behind interstate supply of services being made liable for mandatory registration, even when the turn over is below the limit?

  15. Vishal says:

    What if the supplier has turnover less than 20L Will Reverge Charge still be charged on his service?

    • Satish Kumar Vattam says:

      Yes irrespective of turnover of Supplier, the recipient of goods/services notified under 9(3) reverse charge need to pay GST….

      • Pokri says:

        Otherwise crooks will create several proprietorship firms and divide the business and stay below the 20L threshold.

  16. Kiran says:

    Sir, I paid rent 20000 pm the owner is not registered under GST. How I can paid gst on rent paid under reveres charge.
    Pls give the list of exps eligible for reverse charge under gst

    • Satish Kumar Vattam says:

      Raise an Invoice as mentioned under 31(3)(F) and provide the details of same in GSTR 2 and based on the same your liability will be computed and need to be paid accordingly, provided you are registered person….

  17. sathya says:

    If we purchased some stationery or other items from a registered dealer, then it wont attracts rcm. is it possible to claim ITC with that bill only? because shop keeper wont upload our GSTIN number of every customer.

    • Satish Kumar Vattam says:

      Small shops like stationary shops etc, if registered they are expected to go under composition and they will not charge any GST from you, hence credit will not be available, however if supplier is paying GST under regular scheme and billing it to you have the right to claim credit of same by asking him to mention your invoice details in GST Return to be filed by him…..

    • Pokri says:

      I think s situation, it will be better to buy from a small unregistered supplier, as you can pay RCM and claim ITC.

  18. pooja says:

    If a defence organisation is raising sponsorship for an event , will that fall under reverse charge scheme under GST. If yes, how much tax charges will be applicable?

    • Satish Kumar Vattam says:

      As there is no exemption, definitely GST on reverse charge need to be paid and same shall be paid @ 18% as nothing specifically mentioned and falls under residuary clause…

  19. Vijaylaxmi says:

    I have 4 branches in a state. Rs.5000 exempt limit under reverse charge is for 1 branch or all the branches together

  20. appu says:

    what rate of labourcharges(hamalies charges) gst on reverscharges

    • Satish Kumar Vattam says:

      Loading and Unloading of Agricultural Produce has been rated as NIl, however in respect of other goods, no specific mention, hence falls under residuary clause and applicable rate shall be 18%

    • Ramen Kumar Pal says:

      1)how can i record transaction for service or goods received before 30th june 2017 and invoice also dated before june 2017 received on 10 july 2107 in the month of July 3017. how can I ger cenvat credit for service tax of vat charged on invoice by supplier.
      2) how can I recorde transaction same situation under reverse charge liability. Very urgent please

      • Amit Walia says:

        Input Credit Available U/s 140(5), under reverse charge no such provision provided, better pay tax with interest in current date presuming that liability accrued on 30th of June

  21. mahendra says:

    What if a registered person goes to other state and pay for some services to unregistered person, then he has to pay tax on RCM basis in his state ?

    • Shashank Rathore says:

      sec 9(4) not apply in case of inter state transaction because in case on inter state supply of service, service provider require to register himself, hence liable to pay tax on normal basis.

  22. Piyush mittal says:

    Sir I am registered in GST for my trading business. Apart from trading busines, I gave a property on rent for Rs 7000 per month. Kindly tell me whether i should take separate registration for rent and charge GST from tenant or my ttenant pay my GST under reverse charge ?
    Plz rply

    • mahendra says:

      As per my understanding, if you have given your property on rent for commercial use and you are having GST registration, then you will have to collect and pay GST. No need to take separate registration if business and property both are in your name (i.e. proprietorship). You will have to add this service in your GST registration.

  23. Samir says:

    I have two Service Tax Registration ( …..ST001 & ….ST002 ) for one PAN & Both registered Address are same , I file the Both’s Service Tax return Saperately, and Now , department provide me only one Provisional ID. for my One Registration ….ST001 ) Now, How can i Migrate in GST for my Second registration (…ST002 ).
    Let you Explain me, what can i do..?

    • Satish Kumar Vattam says:

      Under GST for all branches within a state can have a common registeration, however in case of different business verticals, you can apply for fresh registeration…..

  24. Samir says:

    I have two Service Tax Registration ( …..ST001 & ….ST001 ) for one PAN & Both registered Address are same , I file the Both’s Service Tax return Saperatly, and Now , department provide me only one Provisional ID. for my One Registration ….ST001 ) Now, How can i Migrate in GST for my Second registration (…ST002 ).
    Let you Explain me, what can i do..?

  25. J. Rangarajan says:

    Is it applicable for Pure labour service also

  26. TATTUR SUDARSHAN says:

    Satish Vattam & Alok Agarwal

    good article sir

    Thanks for sharing

    Regards
    Tsudarshan
    9848986217

  27. Naveen Agrawal says:

    At what rate will recipient of GTA service pay GST on reverse charge mechanism and avail input credit on it ?

    • TATTUR SUDARSHAN says:

      FOR GTA 5 % WITH OUT INPUT

      • Satish Kumar Vattam says:

        GTA without input means, GTA cannot avail any input credit, however the reciepient of service, who is paying the GST on reverse charge can take credit of GST paid……

  28. Naveen Agrawal says:

    Is it mandatory to issue payment voucher against unregistered purchase even if we settle the account by supplying goods to the same unregistered dealer?

    • Satish Kumar Vattam says:

      your supply will be also require raising of invoice and levy of GST, GST on reverse charge need to be paid on cash and then only credit can be used to pay output tax on outward supplies….

  29. Ekta Maheshwari says:

    very useful, thanks for the efforts

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