Reverse Charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.
There are two type of reverse charge scenarios provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/SGST (UTGST) Act and section 5 (3) of the IGST Act.
As per CGST Amendment Act 2018 w.e.f. 01 Feb 2019 , Sec 9(4) has been amended to refer only to specified goods and services as notified by the Government and not all supplies. But the list is yet to be notified, after which this provision Sec 9(4) shall apply to all such supplies notified
There are a number of notifications issued , time to time ,by the Government for adding specified goods, services and category of supplier to be covered under Reverse Charge mechanism (RCM).
A consolidated updated list indicating nature of supply ( goods / services ), category of the supplier and the recipient covered under RCM is as indicated below :-
|Sl.||Nature of Supply ( Goods / Services)||Supplier of Goods/ Services||Recipient of Goods / Services|
|1||Purchase of cashew nuts, not shelled or peeled||Agriculturist||Any registered person|
|2||Purchase of bidi wrapper leaves (tendu)||Agriculturist||Any registered person|
|3||Purchase of tobacco leaves||Agriculturist||Any registered person|
|4||Purchase of silk yarn||Any person who manufactures silk yarn||Any registered person|
|5||Purchase of raw cotton||Agriculturist||Any registered person|
|6||Purchase of lottery ticket||State Government||Selling agent|
|7||Purchase of used vehicles, seized and confiscated goods, old and used goods,
waste and scrap
|Central Government, State Government, Union territory or a local authority||Any registered person|
|8||Purchase of priority Sector Lending Certificate||Banks / Financial Institution||Any registered person|
|9.||Purchase of Cement||Any person||Promoter/ Builder|
|Services of Goods Travel Agency (GTA)||Goods Transport Agency (GTA)||Any factory, society, co-operative society, registered person, body corporate, partnership firm, casual taxable person located in the taxable territory|
|10(a) RCM on GTA services not applicable if GTA opts to pay the tax on forwards charge @ 12%|
|11||Legal Services of the advocate||An individual advocate including a senior advocate or firm of advocates||Any business entity located in the taxable territory|
|12||Services of an arbitral tribunal to a business entity||An arbitral tribunal||Any business entity located in the taxable territory|
|13||Sponsorship services||Any person||Anybody corporate or partnership firm located in the taxable territory|
|14||Director’s services ( except remuneration)||A director of a company or a body corporate||The company or a body corporate located in the taxable territory|
|15||Services of insurance Agent||An insurance agent||Any person carrying on insurance
business, located in the taxable
|16||Services of Recovery Agent||A recovery agent||A banking company or a financial institution or a non-banking financial company, located in the taxable territory|
|17||Services of overseas Committee||Members of Overseeing Committee constituted by the Reserve Bank of India||Reserve Bank of India.|
|18||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 section||Author or music composer, photograph her, artist, or the like||Publisher, music company, producer or the like, located in
the taxable territory
|18(a) Author can exercises the option to pay GST on the service relating to original literary works under forward charge w.e.f 01.10.2019|
|19||Services by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project .||Any person||Promoter|
|20||Long term lease of land (30 years or more) 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||Any person||Promoter|
|21||Services of an individual Direct Selling Agents (DSAs)||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|
|22||Services of a business facilitator (BF)||Business facilitator (BF)||A banking company,
located in the taxable territory
|23||Services of business correspondent (BC)||An agent of business
|A business correspondent, located in the taxable territory|
|24||Security services||Any person other than a body corporate||A registered person,
located in the taxable territory
Services of hiring of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration paid by service recipient,
|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
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.
In addition to the above , following expenditure /services are also covered under RCM :-
(a) 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.
(b) Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017).
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