GST Council in its 14th meeting held at Srinagar on 18th & 19th of May 2017, recommended the list of goods & services on which tax should be levied under Reverse Charge Mechanism.
In all, Council suggested 12 services to be notified by the government on which Reverse Charge Mechanism shall apply. Not only services but Reverse Charge Mechanism is applicable on supply of goods also.
In this article we will cover all the provisions related to Reverse Charge Mechanism under GST in a question answer form.
What is Reverse Charge mechanism?
Unlike normal supplies, where supplier collects the tax from the recipient and deposits the same after adjusting his output tax liability with input tax credits, under the reverse charge mechanism liability to pay tax on a particular supply is on the recipient of supply.
| As per section 2(98) of CGST Act’2017, “reverse charge” means the 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 sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; |
| Section 9(3) of CGST Act’2017 says: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, 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.
Similarly Section 5(3) of IGST Act’2017 says: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, 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. |
| Section 9(4) of CGST Act’2017 says: The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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.
Similarly Section 5(4) of IGST Act’2017 says: The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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. |
From this two things are clear:
- Reverse charge may be applicable in case of supply of notified goods or services or both.
- Reverse charge is also applicable in case of supply by an UNREGISTERED person to a REGISTERED person, where such supply is of taxable goods or services i.e. exempt supply received from an un-registered person is not covered under reverse charge mechanism.
What happens if a supply notified to be covered under reverse charge mechanism is an exempt supply under GST?
Government does not ask the recipient of supply to pay tax under reverse charge mechanism if such supply is exempt under GST. Even in case some supplies are exempt conditionally, the same is excluded from the purview of reverse charge mechanism subject to those conditions.
| Section 9(3) of CGST Act’2017 says: “The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, 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.” |
So in case such notified service is exempt, no tax under Reverse Charge Mechanism has to be paid.
Whether liability to pay tax under Reverse Charge Mechanism depends only upon category of goods or services?
No, liability to pay tax under RCM not only depends upon category of goods or services, but it also depends upon the category of recipient, category of supplier and place of provision of such supplies. This is discussed in detail later in this article.
Who is liable to pay tax under reverse charge mechanism?
Under reverse charge mechanism, liability to pay tax on a particular supply is on the recipient of supply.
| However section 9(5) of CGST Act states that “The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services”. |
As of now, only Radio taxi or Passenger Transport Services provided through electronic commerce operator provide by Taxi driver or Rent a cab operator to any person shall be taxable under Reverse Charge Mechanism to be paid by E-commerce operator.
In all the other cases liability to pay tax under reverse charge mechanism shall be on the recipient of the supply.
However where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax. Also where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
When does the liability to Pay Tax under Reverse Charge Mechanism arise?
In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:
- the date of the receipt of goods; or
- the date of payment as entered in the books of account of the recipient; or
- the date on which the payment is debited in his bank account, whichever is earlier; or
- the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:
However, where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply. [Section 12(3) of CGST Act’2017]
What will happen to the tax paid by a person under Reverse Charge Mechanism?
| Section 2(62)of CGST Act states that: “ “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes:
(a) ………; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, |
So, such Tax paid under reverse charge mechanism is available as ITC to the registered recipient person. But registered person shall avail credit of this ITC only if such input supply is not otherwise specifically mentioned, to be of category of supplies on which ITC is restricted under this Act.
How to pay tax under Reverse Charge Mechanism?
| Section 2 (82) of CGST Act 2017, states that ““output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis”; |
| Section 49(4) states that “The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed.” |
Since section 49(4) allows the ITC to be used for payment of only Output Tax, so it can be interpreted that ITC cannot be used for payment of tax under Reverse Charge Mechanism i.e. tax under Reverse Charge Mechanism can be paid through cash mode only.
In case of normal supplies where payment to supplier is not made within 180 days of supply, ITC is not available on such supply. Do the same provisions apply for tax paid under Reverse Charge Mechanism also?
No, registered person will not lose the ITC for tax paid under Reverse Charge Mechanism in case payment to supplier is not made within 180 days of time of supply, as Second Proviso to Section 16 specifically excludes supplies made under reverse charge mechanism.
| Second Proviso to Section 16
“where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed.” |
When turnover of both recipient and the supplier are below threshold limit to obtain registration, what will happen in case recipient receives some goods or services which are liable to be taxed under Reverse Charge Mechanism?
| Section 24 starts with a non-obstante clause as follows:
“ Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,–– (i)… (ii)…. (iii) persons who are required to pay tax under reverse charge; “ |
So even in case of person whose turnover is less than the threshold limit, registration under GST is mandatory for them.
Being a composition dealer, do I have to pay tax under Reverse charge mechanism? I am not allowed to take ITC for my inward supplies, so what will happen to the tax paid by me under Reverse charge mechanism?
| Section 2(62) says that “input tax” does not include the tax paid under the composition levy. |
Here the word used are “under” and “levy” and not “by” and “dealer/person”. Also section 10(1) state that Composition scheme does not affect the liability of the dealer to pay tax under reverse charge mechanism.
Also section 10(4) state that Composition dealer shall not be entitled to any credit of input tax. So it can be interpreted that a composition dealer shall not claim credit of tax paid under Reverse Charge Mechanism. Also composition dealer shall pay tax under Reverse Charge Mechanism at normal rate of tax applicable to such supply and not at the rate applicable for his category.
What will happen to ITC paid by the supplier who is supplying services which are notified to be taxed under Reverse Charge Mechanism?
| Section 17(2) of CGST Act’2017 states that “Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.” |
| At the same time section 17 (3) of CGSST Act’2017 state that “ The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.” |
So, we may interpret from these sections that for the purpose of apportionment of ITC, supplies on which tax is payable under Reverse Charge Mechanism shall be treated as exempt supplies and on the exempt supplies ITC shall not be available. So in this way government by passing a notification giving effect to some class of goods or services to be taxed under Reverse Charge Mechanism, may restrict the ITC available with the supplier.
Now that we have discussed almost every aspect of Reverse Charge Mechanism, let take a look at the goods or services as suggested by the GST Council on which provisions of Reverse Charge Mechanism are applicable.
| Recipient | Service | Provider | Payment by |
| (a) any factory registered under or governed by the Factories Act, 1948;
(b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; |
Services provided or agreed to be provided by a goods transport agency (GTA) in respect of transportation of goods by road | Goods Transport Agency (GTA) | Recipient |
GTA service provided by a GTA to a registered persons, casual taxable person, Factory, Society, Co-operative Societies, any Body Corporate, partnership firm or an AOP are covered under Reverse Charge Mechanism and tax has to be paid by the recipient of supply.
Even advance payments are subject to Reverse Charge Mechanism.
The term GTA has not been defined under the Act, however as per Section 65(50b) of Finance Act, 1994 “Goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.
The term body corporate has neither been defined in the Act nor any reference has been made to some other Act, however as per Section 2(11) of the Companies Act, 2013: “body corporate” or “corporation” includes a company incorporated outside India, but does not include:
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii)any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf.
| Recipient | Service | Provider | Payment by |
| A banking company or a financial institution or a non-banking financial company. | Services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company | A recovery agent | Recipient |
Services of recovery agent availed by a banking company, NBFC or financial institution are covered under Reverse Charge Mechanism and tax has to be paid by recipient of such services. Even advance payments are subject to Reverse Charge Mechanism.
| Recipient | Service | Provider | Payment by |
| A company or a body corporate | Services provided or agreed to be provided 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 | Recipient |
Services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate otherwise than in capacity of employee shall be taxable under Reverse Charge Mechanism and tax shall be paid such company or body corporate.
Even advance payments are subject to Reverse Charge Mechanism.
| Recipient | Service | Provider | Payment by |
| Any business entity. | Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly | An individual advocate or firm of advocates | Recipient |
| Services provided or agreed to be provided by an arbitral tribunal | An arbitral tribunal |
Even advance payments are subject to Reverse Charge Mechanism.
Following services provided to any business entry shall be subject to Reverse Charge Mechanism:
- Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly
- Services provided or agreed to be provided by an arbitral tribunal
However as per Entry no. 16, following services are exempt from tax under GST:
- Where Arbitral tribunal, Senior advocate, Junior advocate or firm of advocates provides legal services
- to non-business entity.
- to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;
- Where Junior advocate or firm of advocates provides legal services to an advocate or partnership firm of advocates providing legal services.
So Reverse Charge Mechanism shall not be applicable in the above-mentioned cases.
| Entry no. 15 of list of exempted services
Services provided by- (a) an arbitral tribunal to – (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; (b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to- (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; or (c) a senior advocate by way of legal services to- (i) any person other than a business entity; or (ii) a business entity up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; |
–
| Recipient | Service | Provider | Payment by |
| Any business entity. | Services provided or agreed to be provided by Government or local authority 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 Government; (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. |
Government or local authority | Recipient |
Services provided by the department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government.
- Taxable if provided to non government customers for personal or business use. [Entry no. 1 in list of exempted services.]
- Taxable even if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
- Do not fall under Reverse Charge Mechanism but taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]
Services provided by Government or local authority in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport.
- Taxable even if provided to Government. [Entry no. 1 in list of exempted services.]
- Taxable even if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
- Do not fall under RCM i.e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]
Services provided by Government or local authority in relation to transport of goods or passengers.
- Taxable even if provided to Government. [Entry no. 1 in list of exempted services.]
- Taxable even if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
- Do not fall under RCM i.e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]
Services provided by Government or local authority in relation to renting of immovable property.
- Exempt where the gross amount charged for such services does not exceed Rs.5000/. (in case of continuous supply of service the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year) [Entry no. 81 in list of exempted services]
- Taxable only if provided to business entities [under clause iv of Entry no. 1 in list of exempted services.]
- Taxable even if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
- Do not fall under Reverse Charge Mechanism i.e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]
All other services provided by Government or local authority.
- Exempt where the gross amount charged for such services does not exceed Rs.5000/. (in case of continuous supply of service the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year) [Entry no. 81 in list of exempted services]
- Taxable only if provided to business entities [under clause iv of Entry no. 1 in list of exempted services.]
- However, exempt if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
- In case it is not exempt, then it is taxable under Reverse Charge Mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]. However, in respect of supplies upto Rs 10,000/-this may be continued by way of an omnibus threshold exemption from payment of GST under reverse charge mechanism u/s. section 9 (4) of CGST/SGST Act. [Entry no. 81 in list of exempted services]
| Entry no. 1 of list of exempted services
Services by Government or a local authority excluding the following services: (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 Government; (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; or (iv) any service, other than services covered under clauses (i) to (iii) above, provided to business entities. |
| Entry no. 39 of list of exempted services
Services provided by Government or a local authority to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to (a) services at S. No. 1 (i), (ii)and (iii); and (b) services by way of renting of immovable property |
–
| Recipient | Service | Provider | Payment by |
| Any person | Radio taxi or Passenger Transport Services provided through electronic commerce operator | Taxi driver or Rent a cab operator | E-commerce Operator |
Radio taxi or Passenger Transport Services provided through electronic commerce operator provide by Taxi driver or Rent a cab operator to any person shall be taxable under Reverse Charge Mechanism to be paid by E-commerce operator.
| Recipient | Service | Provider | Payment by |
| Any person carrying on insurance business | Services provided or agreed to be provided by an insurance agent to any person carrying on insurance business | An insurance agent | Recipient |
| Anybody corporate or partnership firm. | Sponsorship services | Any person | Recipient |
| Importer as defined under clause (26) of section 2 of the Customs Act, 1962. | Services 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 to a person located in non-taxable territory | Recipient |
| Publisher, Music company, Producer | 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 | Author or music composer, photographer, artist, etc | Recipient |
These clauses are self-explanatory.
| Recipient | Service | Provider | Payment by |
| Any person located in the taxable territory other than non-assessee online recipient (Business Recipient) | Taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory other than non-assessee online recipient (OIDAR) | Any person who is located in a non-taxable territory | Recipient |
In case of B2B import of OIDAR services, recipient of services shall pay tax under reverse charge mechanism.
In case of B2C import of OIDAR services, supplier or his intermediary shall pay tax under forward charge mechanism.
Such supplier shall, for payment of IGST, take a single registration under the Simplified Registration Scheme to be notified by the Government. Alternatively, any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay IGST on behalf of the supplier. In case such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.
Since CGST & IGST Acts are not applicable to the State of Jammu & Kashmir as it is a non-taxable territory, so for the purpose of this discussion only import includes services received from Jammu & Kashmir.
Other miscellaneous provisions:
- In case of B2C import of other services, no tax shall be payable under GST.
- In case of B2B import of other services, tax shall be payable by recipient of services.
- In case of B2B import of goods, tax shall be payable by recipient of goods.
- As per entry no. 1 of chapter 24 of GST rate schedule for goods as suggested by GST Council in its meeting held on 18th May 2017 tax @5% on Tobacco leaves shall be paid under reverse charge by the recipient of goods.
Thank you for reading article written by CA. Mithun Khatry
Suggestions are invited at [email protected]
Disclaimer:
This article includes general information about legal issues and developments in the proposed law of GST in India. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances.
We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this article to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.
Author Bio
I got stock by vrl logistics (interestate),how will i show rcm in our return as sgst and cgst or igst
Dear Sir,
Now reverse charge mechanism (RCM) existing under GST or not
Now reverse charge mechanism (RCM) existing under GST or not
Respected Sir, I am a service recipient in the state of Maharashtra & Legal Service Provider is from the state of Delhi. May I liable to Pay IGST or CGST/SGST of Maharashtra in this case.
Please let me know the same. Thanks.
Kindly clarify NBFCs RCM 100% Credit applicable or not
we have ITC Credit taken 50% Only ( sub-(section (4) of section 17 ) but Legal Fee for – RCM ? 100% or 50%
Sir,
1.Is a registered tenent liable to pay GST on rent under RCM as the owner is not Registered under GST since he doesn’t not come under the threshold
2. Can he claim any refund?
Reply is highly appreciated.
Sir whether gst paid under rcm by a registered firm of kolkata for payment made to unregistered GTA of Odisha will be shown as cgst or igst.
This article has clarified many of the doubts and thanks for the same….. but please throw some light on the below under RCM category:
1. payment made by registered person to unregistered person doing Accounting work for him.
2. payment made by registered person as commission / brokerage/Interest etc… to unregistered person.
3. Rent payment to unregistered person
4. All such services provided by persons whose total turnover is below 20 lakhs and the said person is unregistered and he is providing service to registered person.
Please clarify…..
rgds
Arun
I want to Payment Rent how to make RCM bill party is unragitar & How much charge 18
We are providing transportation services to our customers who is GST registered customer., Can we raise bill to them without GST and mentioning only GST payable by the consignee / Consigner or as per GST we should mentioned any other clauses on the bill
RCM under GTA. As per Sec 2(62), clearly given that, a recipient is entitle to avail ITC of the tax payable under the provisions of sub-sections (3) and (4) of
section 9.
In this regards, As per the schedule given under Service. GST on GTA will be paid by the recipient as RCM @ 5%, but in schedule found “NO ITC” .
Whether “NO ITC” means, ITC is not for the service provider for his input tax or to the Recipient who pay under RCM.
Please Advise
I have an doubt on RCM under GTA. As per Sec 2(62), clearly given that, a recipient is entitle to avail ITC of the tax payable under the provisions of sub-sections (3) and (4) of
section 9.
In this regards, As per the schedule given under Service. GST on GTA will be paid by the recipient as RCM @ 5%, but in schedule found “NO ITC” .
Whether “NO ITC” means, ITC is not for the service provider for his input tax or to the Recipient who pay under RCM.
Please Advise
Query No.1
Sir,
Cardamom and Pepper are spices taxable @ 5%. If a farmer sells his Cardamom/Pepper to a registered dealer, whether the dealer has to pay Reverse Tax? The sale by the farmer- Is it a Supply? It is not in the course or Furtherance of business?
sir kindly guide that whether RCM is applicable on small service like binder, lock and key repair services etc
Sir Kindly guide me on
Is Reverse Charge applicable for Following Expenses :
1. Interest paid on Loans (Other than Bank/ FI)
2. Accounting Fees Paid.
3. Commission Paid
4. Conveyance Expenses paid
please explain 9(4) under rcm expenses limit per day
it is applicable for one branch or each state registered is applicable under same PAN
Dear Sir
Thanks for very useful article.
As a registered manufacturer, our business expenditures like purchases of stationary from unregistered person is comes under RCM or we have to pay reverse charge on such expenses.
As its fulfill second rule “Reverse charge is also applicable in case of supply by an UNREGISTERED person to a REGISTERED person.”
If we are liable to pay reverse charge on expenses then, can we take ITC of such RC.
Thanks
thank you very much for giving very very useful inforamtion
Dear Sir
I shall mention this that your article on Reverse Charges is very comprehensive and helpful on taxguru.
In addition, it’ll be really helpful if you can share some information on the scenario below:
Scenario:
2 GST Registered Companies – (GST1 & GST2)
GST1 collects waste paper from GST2 for which GST2 does not want to raise an invoice as a sale.
Query:
1. Can GST1 raise a self Inovice and deposit GST tax on reverse charge basis??
2. What document shall be carried during movement of “Waste Paper” from GST2 location to GST1 location
Any help in this regard will be greatly appreciated.
Service received from unregistered dealer in that case GST payable by recipient.
Is it required raise a invoice by service recipient for making the GST payment under RCM?
Sir,
We are running a website and getting the income from Google Adsense. This will come under export of service, where the service tax needs to be paid is zero. We are paying service tax in the reverse charge mechanism while paying for Server charges or for some software subscriptions where the supplier is located outside India.
Could you Please let me know the procedure to get back the paid service tax (towards purchases in reverse charge mechanism) as input tax credit and withdrawing that amount to my bank account as there is no need to pay any service tax.
I just would like to know about drinking water. we buy 20 L Drinking water can to our office which the delivery man is unregistered; the manufacturer is registered. He gives me bill for total amount from his end; but no tax division as he is not eligible to collect tax. Will there any problem of GST / RCM ?
Is it exempted category like Milk ?
Plz assist
Dear Sir,
Please let me know if Entities below 20 lacs of turnover per month will also do GST registration by 1st July?
Gta is under reverse charge mechanism
So it is not compulsory for the road transporters to register under gst and take gst number??
Resp. Sir
With regards to following FAQ There is no Registered Person Involved in Transaction. How can The recepient Be Liable to get Registered??
When turnover of both recipient and the supplier are below threshold limit to obtain registration, what will happen in case recipient receives some goods or services which are liable to be taxed under Reverse Charge Mechanism?
Section 24 starts with a non-obstante clause as follows:
“ Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––
(i)…
(ii)….
(iii) persons who are required to pay tax under reverse charge; “
So even in case of person whose turnover is less than the threshold limit, registration under GST is mandatory for them.
ITC claim and credit process on goods transport agency under RCM.
ITC claim and credit process on Goods Transport Agency under RCM
Does RCM applies for unregistered person who provides services in SEZ
reverse charge payment on supplies by unregd dealer is any limit specified pls see exempt list of services sr no 81 given below and give your comments
81.
Services provided by Government or a local authority where the gross amount charged for such services does not exceed Rs.5000/.
Provided that nothing contained in this entry shall apply to services S. No. 1 (i), (ii)and (iii) above:
Provided further that in case where continuous supply of service, as defined in sub-section (33) of section2 of the CGST Act, 2017, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year;
[This may be continued by way of an omnibus threshold exemption from payment of GST under section 9 (4) of CGST/SGST Act in respect of supplies upto Rs 10,000/-].
they have given reference in para above to sec 9(4) of CGST/sgst which deals with reverse charge in act no threshold is prescribed in act but in exempt list as per entry 81 they have given above reference in para
Does a registered dealer pay RCM on rent paid to an URD ( of rental services )
At what rate the RCM will need to be deducted ? Is it the same rate at which such supplies are Taxable under GST or some fixed rate for all supplies ?
I mean GST
Under RCM subsequent sales will attract SGT further?
The Article on Reverse Charge is informative and covers most of the important points. However, in respect of the following question, the contention of the author seems to be incorrect.
When turnover of both recipient and the supplier are below threshold limit to obtain registration, what will happen in case recipient receives some goods or services which are liable to be taxed under Reverse Charge Mechanism?
The author has stated that the recipient is liable for registration by giving the reference of section 24. It is true that persons who are required to pay tax under reverse charge are required to get themselves registered.
However, we need to analyse relevant portion of section 9, in order to understand the applicability of reverse charge.
Under section 9(3), tax is payable on reverse charge basis on eighteen different categories by the specified persons (and not the service providers). In such case, the specified person will have to get himself registered. The specified person may not be the recipient of services. e. g. in case of of service type “Radio taxi or Passenger Transport Services provided through electronic commerce operator”, recipient of services would be the passenger. However, tax under reverse charge is required to be paid by Electronic Commerce Operator. The passenger can be unregistered person and he need not take registration by virtue of section 24.
Under section 9(4), tax is payable on reverse charge basis if supply is made by unregistered person to a registered person . Thus, if supply is made by unregistered person to unregistered person, tax under reverse charge shall not be applicable under this provision.
Therefore, it follows that since tax is not under reverse charge when supply is made from unregistered person to unregistered person, registration will not be necessary by virtue of section 24.
Author is requested to comment on this aspect.
Please clarify me:
if my turnover is would be less than 20 lakhs in coming years
and
my inward supplies would be from unregistered dealer.
so
I have to get registered myself for paying liability under reverse charge.
Even I am not dealing in the goods or services notified for the reverse charge.
Sir,
Thank you for this useful article.
Though, I have an doubt on RCM under GTA.
Previously it was mentioned in service tax that if the recipient is situated in non-taxable territory than GTA will itself collect and deposit the tax.
But the same provision is not mentioned in GST.
So, how this would be tackle.
Please guide.
Sir,
Really such a nice compilation of all the provisos related to RCM.
Can u please elaborate implications of Section 9(4).
i am interpreting this section as, “if the supplier of taxable goods/services is covered under threshold limit and not register himself under GST. if he is supplying goods/services to register person then such person (Recipient) is liable to pay tax under RCM. it means every registered recipient have to pay tax on taxable inputs either in the form of RCM or charged by seller in invoice.
I have doubt with regard to GTA under RCM in GST in case of inter state for used article what would be the calculation of GST as the GST specifies 5% for used article under GST.
All types of amendments in all types of taxes in very short period. 1)Demonetisation, 2) Details in ITR for deposit of Rs.2 lakhs & more (though promised Rs.2.5 in SB and 12.5 in Current a/c). 3)GST (changes reported on daily basis). 4)Specified Financial Transactions filing. 5)Applicability of ICDS etc.
All the above are suffocating trade and industry that too in the name ‘ease in doing business’. Sheer endless madness.
This NDA Regime would definitely face revolt first from business community.
In respect to ITC for tax paid under RCM by composition dealer , Section 10(4) specificaly excludes ANY credit of input tax . Thus, composition dealer is not eligible to take ITC on tax paid under 9(3) and 9(4).
sir,
Credit availed in RCM
Sir,
Thank you!!! it’s an useful article.
I have an doubt on RCM under GTA. As per Sec 2(62), clearly given that, a recipient is entitle to avail ITC of the tax payable under the provisions of sub-sections (3) and (4) of
section 9.
In this regards, As per the schedule given under Service. GST on GTA will be paid by the recipient as RCM @ 5%, but in schedule found “NO ITC” .
Whether “NO ITC” means, ITC is not for the service provider for his input tax or to the Recipient who pay under RCM.
Please Advise