Due Date of Payment- Under Reverse Charge (GST)

Generally a supplier use to collect and pay indirect taxes applicable on supply of goods and services.

However Reverse Charge mechanism (RCM) is a method under which the receiver of Goods and service, instead of the supplier, is required to pay GST.

The concept of RCM (Reverse Charge Mechanism) under GST is not new as it was well in existence under service tax regime also.

Goods Services on Which GST is payable under RCM (Reverse Charge Mechanism)

We know that GST is payable under RCM (Reverse Charge Mechanism) on

1. Services received from non-taxable territory (i.e import of services) (Notification No 10/2017- IT ( R)dated 28.06.2017)

2. Goods and Services notified u/s 9(3) of CGST Act 2017 (some of these are Goods Transport agency services, legal services, sponsorship services, director services, Insurance agent services, recovery agent services, services provided by Central Govt, State Govt etc)

(For services– Notification No 13/2017 dated 28.06.2017, Notification No 3/2018 dated 25.01.2018, Notification No 33/2017 dated 13.10.2017

For Goods– Notification No 4/2017 dated 28.06.2017, Notification No 43/2017 dated 14.11.2017, Notification No 36/2017 dated 13.10.2017)

  3.   Goods and services supplied by unregistered dealers u/s 9(4) of CGST Act {However Sec 9(4) has been kept in abeyance till further notification).

In this article we will discuss about the due date of payment, ITC and payment methodology of GST under RCM .

We know that GST under RCM is paid at the time of filing GSTR3B (for regular dealers) or GSTR4 (in case of composition dealer). The due date of GSTR3B and GSTR4 is as below:

Due date of GSTR3B and GSTR4

Hence for regular dealers the due date of payment of GST under RCM is 20^th of the following month and for composition dealers due date is 18^th of the following month from end of quarter.

So for a regular dealer all the RCM liability arisen in the month of January 2019 is required to be paid by 20^th Feb 2019 and for composite dealer all the RCM liability arisen in the quarter of January 2019 to March 2019 is required to be paid by 18^th April 2019.

Time of Supply:

To determine the month (more particularly day) in which RCM liability arisen, we can refer sec 12 and 13 of CGST Act 2017.

As per section 12(1) and 13(1) of CGST Act 2017 the liability to pay GST arises at the time of supply of goods and services respectively.

Hence time of supply is the key factor which determines the due date for payment of GST under RCM. The time of supply under RCM is as below:

Hence we can conclude that in case of Goods time of supply would be earlier of

1. date of receipt of goods or
2. date on which payment is made to supplier or
3. 30 days from date of invoice or other similar documents by the supplier.

And in case of services time of supply would be earlier of

1. date on which payment is made to supplier or
2. 60 days from date of invoice or other similar documents by the supplier.

Example: Suppose Mr X (a lawyer) has provided services to ABC Ltd for different cases as below:

From the above table we can see that in case number 1 and 2 the payment is made within 60 days from date of invoice and hence in such cases time of supply coincide with date of payment itself.

However in case No 3 to 5, final payment is either not made or made after 60 days from date of invoice. Hence in these cases time of supply would be on expiry of 60 days from date of invoice i.e 16.10.2018.

ITC (Input Tax Credit):

The tax paid under RCM is available as ITC (subject to other provisions of the Act like sec 17(5) etc) against challan of payment of GST. However composition dealer can’t take ITC of GST paid under RCM, since composite dealer can’t claim any ITC.

Rate of GST on inward Goods and services:

The rate of GST will depend on the nature of goods and services. It will be the same rate as applicable for supplier of such goods and services.

Payment of GST tax under reverse charge:

Any amount payable under reverse charge shall be paid by cash only. In other words, reverse charge liability cannot be discharged by using input tax credit.

Issue of self invoice:

The Recipient of supplies who is liable to pay tax under reverse charge is required to raise an invoice in respect of supplies from unregistered dealers (like supply from unregistered lawyer, unregistered director, unregistered transporter etc). This aspect is called self invoicing.

The Recipient of supplies shall also issue a payment voucher at the time of making payment to supplier.

One of the Advance Ruling related to RCM is cited below:

Reliance Infrastructure Ltd (2018-TIOL-22-AAR-GST)

CGST- Recovering of charges for restoring the patches of roads which have been dug up by business entities of the nature as the applicant cannot be equated to performing a sovereign function as envisaged under Article 243W of the constitution -service does not fall under entry no. 4 of Notification 12/2017-CT(R) and there is no other entry under his notification which can cover the impugned transaction – GST is payable on reverse charge basis [Entry no. 5, Notification 13/2017-CT(R)] on reinstatement charges and access charges paid to Municipal authorities towards restoration of roads – Residuary Entry no. 35 of Notification 11/2017-CT(R) covering ‘services nowhere else classified’ and attracting GST @18% [9% each CGST & MGST] would be applicable: AAR.

Hope the users will find this article useful to meet their day to day compliance.