Generally, the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Reverse Charge means liability to pay the tax is on the person receiving goods/services instead of the person supplying the goods/services in respect of specified categories of supplies.

Basic Concepts:

  • Reverse charge under GST is applicable on services as well as on goods
  • Liability under reverse charge is absolute the recipient cannot be absolved from his liability even if tax is paid by the supplier under forward charge.
  • The recipient is eligible for input tax credit for the amount paid under reverse charge subject to the provision contained in sec 16 to sec 18 of the GST Act in respect of eligibility of ITC.
  • Supply should be taxable under the GST and if the supply has been exempted under the GST Act, tax shall not be paid by the recipient
  • Recipient should be located in the taxable territory
  • GST under reverse charge shall be paid at the rate applicable to respective goods and services
  • There is no threshold limit applicable for reverse charge. It is a mandatory registration as per Section 24 of the Act.

Documentation for Reverse Charge:              

  • A registered person who is liable to pay tax u/s 9(3) or 9(4) shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both
  • A registered person who is liable to pay tax u/s 9(3) or 9(4) shall issue a payment voucher at the time of making payment to the supplier.

Time of Supply:

 In case of supply of goods, time of supply is earliest of-

  • date of receipt of goods; or
  • date of payment as per books of account or date of debit in bank account, whichever is earlier or
  • the date immediately following thirty days from the date of issue of invoice or similar other document.

In case of supply of services, time of supply is earliest of-

  • date of payment as per books of account or date of debit in bank account, whichever is earlier or
  • the date immediately following sixty days from the date of issue of invoice or similar other document.

Where it is not possible to determine time of supply using above methods, time of supply would be date of entry in the books of account of the recipient.

Supplies of Goods under Reverse Charge Mechanism: 

S.No. Description of supply of goods Supplier Recipient
1 Cashew nuts, not shelled or peeled  Agriculturist Any Registered Person
2 Bidi wrapper

leaves (tendu)

 Agriculturist Any Registered Person
3 Tobacco Leaves  Agriculturist Any Registered Person
4 Silk Yarn Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn Any Registered Person
5 Supply of Lottery State Government, Union Territory or any local authority Lottery distributor or selling agent
6 Used vehicles, seized & Confiscated goods, old & used goods, waste and scrap Central Govt., State Govt. Union Territory or a local Authority Any Registered Person
7 Raw Cotton Agriculturist Any Registered Person
8 Priority Sector Lending Certificate Any Registered Person Any Registered Person

 Supplies of Services under Reverse Charge Mechanism:

S.No Description of supply of service Supplier Recipient
1 Supply of Services by a Goods Transport Agency (GTA) who has not paid central tax at the rate of 6%, in respect of transportation of goods by road to any factory, society, co-operative society, registered person, body corporate, partnership firm, association of persons, casual taxable person.

Provided that nothing contained in this entry shall apply to services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to-

(a) a Department or Establishment of the Central Government or State Govt. or Union territory; or

(b) local authority; or

(c) Governmental agencies, which has taken registration only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.

Goods Transport Agency (GTA) Any factory, society, co-operative society, registered person, body corporate, partnership firm, association of persons, casual taxable person
RCM is not applicable to those GTA Services where the GTA opts to pay tax under forward charge @ 12%
2 Services supplied by an individual advocate including a senior advocate by way of legal services directly or indirectly An individual advocate including senior advocate or 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(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
5A Services supplied by the Central Government, State
Government, Union territory or local authority by way of renting of immovable property to a registered person
Central Government, State
Government, Union territory or local authority
Any registered person
5B Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter Any Person Promoter
5C Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter Any Person Promoter
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 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
9 Services of an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

w.e.f. 01.10.2019

Services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a
music company, producer or the like

Author or music composer, photographer, artist, or the like Author Publisher, music company, producer or the like, located in the taxable territory Publisher Located in the taxable territory.
9A w.e.f.01.10.2019
Supply of services by an author 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 works to a publisher.
Author Publisher located in
the taxable territory.
Provided that nothing contained in this entry shall apply where-(i) the author has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017), and filed a declaration, within the time limit prescribed with the jurisdictional CGST or SGST commissioner, as the case may be, that he exercises the option to pay central tax on the service specified in column (2), under forward charge in accordance with Section 9 (1) of the Central Goods and Service Tax Act, 2017 under forward charge, and to comply with all the provisions of the Act, 2017 as they apply to a person liable for paying the tax in relation to the supply of any goods or services or both and that he shall not withdraw the said option within a period of 1 year from the date of exercising such option;-(ii) the author makes
a declaration, as prescribed on the invoice issued by him in Form GST Inv-I to the publisher.
10 Supply of services by the members of Overseeing Committee to Reserve Bank of India Members of Overseeing
Committee constituted by the Reserve Bank of India
Reserve Bank of India.
11 Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs). Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm. A banking company or a non-banking financial company, located in the taxable territory
12 Services provided by business facilitator (BF) to a banking company Business facilitator (BF) A banking company,
located in the taxable territory
13 Services provided by an agent of business correspondent (BC) to business correspondent (BC). An agent of business
correspondent (BC)
A business correspondent, located in the taxable territory
14 Security services provided to a registered person:

Provided that nothing contained in this entry shall apply to, –

(i)  a Department or Establishment of the Central Govt. or State Government or Union territory; or

(b) local authority; or

(c) Governmental agencies;

which has taken registration under Act, 2017 only for the purpose of deducting tax under section 51 of the Act and not for making a taxable supply of goods or services; or

(ii) a registered person paying tax under section 10 of the said Act.

Any person other than a body corporate A registered person,
located in the taxable territory
15 w.e.f. 01.10.2019
Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate.
Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent. to the service recipient Any body corporate located in the taxable
territory.
16 w.e.f. 01.10.2019
Services of lending of securities under Securities Lending Scheme, 1997 (“Scheme”) of Securities and Exchange Board of India (“SEBI”), as amended.
Lender i.e. a person
who deposits the securities registered in his name or in the name of any other person duly authorised on his behalf with an approved intermediary for the purpose of lending under the Scheme of SEBI
Borrower i.e. a person who borrows the securities under the Scheme through an approved
intermediary of SEBI.

Supply of Services under Reverse Charge Mechanism under IGST

S.No Description of supply of service Supplier Recipient

 

1 Any service supplied by any person who is located in a non-taxable territory to any person (other than non-taxable online recipient) Any person located in Non-Taxable territory Any person located in Taxable territory

 

2 Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. A person located in non-taxable territory Importer, as defined in clause (26) of sec 2 of the customs act, 1962, located in the taxable territory.

 

NN 8/2017- IT (Rate) dt 28 June 2017 read with Corrigendum dated 30 June 2017 w.e.f. 1 July 17:- where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax, the same shall be deemed to be 10% of the CIF value (sum of cost, insurance and freight) of imported goods

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9 Comments

  1. Tushar C says:

    if Individual Service provider provides recovery services to Bank, whole GST liability will be discharged by Bank.
    Then what are GST return forms applicable and supposed by filed for Individual Service provider

  2. BHARAT PAL says:

    Medam mera ek problem hua ki mey april month ka 3b return 20th may submit ke samay april month ka rcm 9(3) gta ka libilities pehele paid keya phir april month us rcm itc fillup kor ke april month maye claim kor leya to ye golat hai ki nahi chole ga eysha

    1. shubhikh says:

      Bharat Pal Ji,

      Hum jis month me GTA ki liability (RCM) pay karte hai, same month me hum uska ITC bhi claim kar sakte hai. To agar aapne April month ki Tax liability pay kia 20th May ki return file karne se pehle to hum April month ki return me hi ITC claim kar sakte hai. Isme koi galti nahi ki aapne

  3. Parameswaran TK says:

    ARC Parcel Service is a GST regd. Service provider. In their GC note they specify that GST is payable by recipient under RCM. Since they are regd, How can I make an
    Invoice. I hear that there are three provisions for paying GST.
    1. If service is incurred for onward business, one can pay 12%GST and avail the same as ITC.
    2. One can pay 5%GST , but cannot claim ITC
    3. If goods are not transported for onward business, pay5%GST.
    How I will upload these RCM details in GSTR1
    ARC has not uploaded any invoice and nothing is appearing in our GSTR2A. Will you kindly publish an article for clarifying these issues .?

    1. shubhikh says:

      Parameswaran TK Ji

      If the invoice specifies that the GST is to be payable by the recipient under GST, then the GST tax rate shall be @ 5% only, as in this case Tax is to paid by the recipient. Where, the tax rate is levied @12%, no GST is to be paid under RCM by the recipient. The same is to be paid by the supplier itself.

      Reporting in GSTR-1: Assuming GST is paid under RCM
      Supplier- Table 4- B2B supplies of GSTR-1 (by ticking the option Supplies against Reverse Charge). The same shall be shown in GSTR-2A of the recipient.
      Recipient has to pay tax in GSTR-3B only and claim ITC

      Hope it clears your doubt

  4. kashupatel22@gmail.com says:

    Greetings !
    Such an excellent article
    I have doubt regarding same.
    Supply of services by CG,SG,UT in the form of renting of immovable property to person having turnover below 20 lakh in preceding financial year, the same is covered under RCM?

    1. shubhikh says:

      Greetings!

      Thank you so much!

      In my opinion, I don’t think so that in your case the transaction is covered under RCM as over here the recipient is not a registered person as on date due to turnover below the prescribed limit. Had it been that the recipient has taken compulsory registration, then RCM Provisions shall be applicable.
      By referring to point 5A in the above article, it specifically states that recipient shall be a registered person. Hence, RCM not applicable in my view.

  5. CA Yash says:

    Greetings !

    Excellent Article, just posted when I was looking for one on RCM.

    Just a doubt, Sl, No 15 is not clear to me. Normally Travel Agents rent our Motor Vehicles @ 5% (without taking ITC Benefit). So in case such travel agents provide services to Corporates, the same is subject to RCM ??? Kindly clarify please

    Thanks & regards

    1. CA Shubhi Khandelwal says:

      Greetings !
      Thank you so much for your warm views !

      S.No. 15 states that the RCM shall be applicable if the following conditions are satisfied namely:
      1. The service shall be the same as above.
      2. Supplier shall be a non- body corporate and does not charge GST @12% in its invoice ( meaning GST in the invoice should be @ 5%)
      3. Recipient shall be a Body corporate located in taxable territory

      Hence,
      Non-Body corporate supplying services to Body Corporate with GST @ 12% in the invoice:- No RCM
      and
      Non-Body corporate supplying services to Body Corporate with GST @ 5% in the invoice:- RCM applicable

      In your case, if the travel agents charge GST @5%, then RCM shall be applicable.

      Hope your query is resolved.

      Thanks & Regards

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