Reverse charge mechanism (RCM) is the mechanism where GST is collected by the buyer instead of seller. There are two types of reverse charge that is
♣ On the basis of nature of supply or on supplier covered under section 9(3) of CGST/ SGST (UTGST) act and 5(3) of IGST Act
♣ On the basis on taxable supply from unregistered person to registered person covered under section 9(4) of CGST/ SGST (UTGST) and 5(4) of IGST Act.
♣ Supply of services through an e – commerce operator under section 9(5) of CGST Act
According to section 9(3) of CGST/ SGST (UTGST) act and 5(3) of IGST Act, the government may on recommendation by the council, by notification specifies a list of categories of goods or services that are charged under reverse charge mechanism.
According to section 9(4) of CGST/ SGST (UTGST) act and 5(4) of IGST Act, the government may on recommendation by the council, by notification specifies supply of taxable goods and services or both by an unregistered supplier to registered person shall be paid directly by the buyer instead of seller.
According to section 9 (5) of CGST Act, if a service provider uses an ecommerce operator to provide specified services, he will be liable to pay GST under reverse charge mechanism. For example providing house-keeping services like plumbing and carpentering through e – commerce operators such as urban clap, the e commerce operator is responsible to collect GST from customers instead of service providers.
A person whose turnover exceeds 40 lakhs (20 lakhs in case of special category except J&K) in case of sale of goods and 20 lakhs (10 lakhs in case of specified categories) in case of services is required to compulsorily register under GST and thus under reverse charge mechanism.
TIME OF SUPPLY
The time of supply depends on the basis of supply of supply of goods or supply of services
Reverse Charge mechanism in case of supply of goods is
a) date of receipt of goods by the buyer;
b) or date of payment or date of amount debited in supplier’s bank account, whichever is earlier;
c) or the date immediately after thirty days from the date of issue of invoice or any other similar other document.
Reverse Charge Mechanism in case of supply of services,
1. date of payment received by the buyer;
2. or date of amount debited in supplier’ bank account, whichever is earlier;
Or date immediately after sixty days from the date of issue of invoice or any other similar document.
Where it is not possible to determine time of supply using both the methods, time of supply would be date of entry in the books of account of the recipient.
COMPLIANCES UNDER REVERSE CHARGE MECHANISM
Author- Adv.Shivam Kumar | Legel and content Executive, Taxblock India Pvt. Ltd