Page Contents
- 1. Definition of Reverse Charge [Section 2(98) of CGST Act 2017]:
- 2. Mandatory Registration (Section 24 of CGST Act):
- 3. List of Goods on which reverse charge mechanism is applicable
- 4. List of Supply of Services on which reverse charge mechanism is applicable
- 5. GST payable under Reverse Charge by the recipient, if goods or services is received from Unregistered person [Section 9(4)] of CGST Act
- 6. List of Additional Services on which reverse charge mechanism is applicable under /s 5(3) of IGST Act,2017
1. Definition of Reverse Charge [Section 2(98) of CGST Act 2017]:
Reverse Charge under GST may be defined as the mechanism where the recipient of goods or services is liable to pay GST to the Government for the supply of goods or services or both in the place of supplier of such goods or services. In the normal mechanism of the GST, Supplier of goods or services is liable to collect the GST from the recipient and deposit it to the Government. Recipient of goods or services is liable to pay GST under reverse charge due to charging section 9(3) of CGST Act
2. Mandatory Registration (Section 24 of CGST Act):
As per this section of the Act, it is clear that the person who liable to pay GST under reverse charge mechanism is compulsory to get registered himself under GST. The threshold limit of Rs. 10/20 Lacs is not applicable on these types of taxpayers.
3. List of Goods on which reverse charge mechanism is applicable
[Notification No. 4/2017-Central Tax (Rate), dated the 28th June, 2017, Notification No. 13/2017- Central Tax (Rate), dated the 28th June, 2017, Notification No. 22/2017 – Central Tax (Rate) dated the 22nd August, 2017, Notification No. 33/2017- Central Tax (Rate) Dated: 13th October, 2017, Notification No. 36/2017-Central Tax (Rate) dated 13th October, 2017, Notification No. 43/2017-Central Tax(Rate) dated 14th November, 2017, Notification No. 11/2018-Central Tax (Rate) Dated: 28/05/2018]
| S/ No. |
Tariff item, sub-heading, heading or Chapter | Description of supply of Goods |
Supplier of goods |
Recipient of Goods |
| 1 | 0801 | Cashew nuts, not shelled or peeled | Agriculturist | Any registered person |
| 2 | 1404 90 10 | Bidi wrapper leaves (tendu) | Agriculturist | Any registered person |
| 3 | 2401 | Tobacco leaves | Agriculturist | Any registered person |
| 4 | 5004 to 5006 | Silk yarn | Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn |
Any registered person |
| 4A | 5201 | Raw cotton | Agriculturist | Any registered person. |
| 5 | – | Supply of lottery | State Government, Union Territory or any local authority | Lottery distributor or selling agent |
| 6 | Any Chapter |
Used vehicles, seized and confiscated goods, old and used goods, waste and scrap |
Central Government, State Government, Union |
Any registered person |
| 7. | Any Chapter | Priority Sector Lending Certificate | Any registered person |
Any registered person |
4. List of Supply of Services on which reverse charge mechanism is applicable
[Notification No.13/2017-Central Tax(Rate) Dated 28-06-2017, Notification No. 22/2017- Central Tax (Rate) dated-22nd August, 2017, Notification No. 33/2017-Central Tax(Rate) Dated 13-10-2017 & vide Notification No. 03/2018 Dated 25th Jan 2018 – Central Tax (Rate)]
| Serial No. | Description of Services | Supplier of Services | Recipient of Services |
| 1. | Supply of Services by Goods Transport Agency (GTA) who has not paid GST at the rate 6% to:- (a) Factory (b) Any registered society (c) Any co-operative society (d) any registered taxpayer under GST (e) Any Body corporate (f) Any partnership firm, LLP or AOP (g) any casual taxable person | Goods Transport Agency(GTA) | (a) Factory (b) Any registered society (c) Any co-operative society (d) any registered taxpayer under GST (e) Any Body corporate (f)Any partnership firm, LLP or AOP (g) any casual taxable person; located in the taxable territory |
| 2. | Supply of Services by an advocate or Senior Advocate to any business entity located in taxable territory by way representational services before the court, tribunal or any other authority | An individual advocate including a senior advocate or firm of advocates | Any business Entity in the taxable territory |
| 3. | Services supplied by the arbitral tribunal to a business entity | Arbitral Tribunal | Any business entity in the taxable territory |
| 4. | Sponsorship Services | Any person | Any body corporate or partnership firm or LLP in the taxable territory |
| 5. | Services by Central Government, State Government, Union Territory or local authority to a business entity excluding:
a) Renting of immovable property b) Speed Post, Life Insurance, agency services. c) Services in relation to aircraft or vessel d) Transport of goods or passengers |
Central Government, State Government, Union Territory or local authority | Any business entity 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 person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017). | Central Government, State Government, Union territory or local authority |
Any person registered under the Central Goods and Services Tax Act, 2017. |
| 6. | Director Services to the Company or body corporate | A director of a company or body corporate | The company or body corporate in the taxable territory |
| 7. | Insurance Agent Services | An insurance agent | Any person carrying on the insurance business in the taxable territory |
| 8. | Recovery Agent Services | Recovery Agent | A banking company or NBFC or a financial institution in the taxable territory |
| 9. | Supply of services by an author, music composer, photographer, artist or the like | author, music composer, photographer, artist or the like | Publisher, music company, producer or the like in the taxable territory |
| 10. | Supply of services by the members of overseeing committee to Reserve Bank of India | Members of overseeing committee | Reserve Bank of India |
5. GST payable under Reverse Charge by the recipient, if goods or services is received from Unregistered person [Section 9(4)] of CGST Act
[Notification No. 8/2017-Central Tax (Rate), dated the 28th June, 2017, Notification No. 38/2017- Central Tax (Rate), dated the 13th October, 2017 and Notification No. 10/2018–Central Tax (Rate) Dated: 23rd March, 2018]
It is to be noted that as per Section 9(4), if a registered person has received the goods or services from the unregistered person, then recipient of such goods or services is liable to pay the GST under reverse charge. But after facing too many difficulties by the taxpayers, the GST Council issues notifications in the public interest to exempt the recipient of goods or services who receives the goods or services from the unregistered person. Such Exemption is available to the taxpayers upto 30th June 2018 as per notification no. 10/2018 of Central Tax (Rate).
Important points to be noted:
- Input tax credit can be claim of GST pay under reverse charge in case of unregistered person subject to the fulfillment of conditions as mentioned in section 16 of CGST Act.
- If the supplier of services is from outside the taxable territory, then the registered recipient of goods or services is liable to pay GST under Reverse Charge. If the recipient is unregistered, then the supplier of services who is outside the taxable territory of India is liable to pay GST to the government.
- If the entire services provided by the transport service provider is covered under section 9(3) of CGST Act (Reverse Charge Mechanism), then such transport service provider is not required to get registered himself under GST.
- If the taxpayer is supplying zero rated goods or services and not registered under GST and also getting services from GTA, then he is liable to get registered as per section 24 of CGST Act
6. List of Additional Services on which reverse charge mechanism is applicable under /s 5(3) of IGST Act,2017
Further, Central Government vide Notification No. 10/2017-Integrated Tax(Rate), dt. 28-06-2017 has w.e.f 1st July 2017 provided the category of services on which IGST needs to be paid on the reverse charge basis completely (100%) by the recipient of such services.
The list of services as notified under the CGST Act is replicated under IGST Act also. In addition to the same, following two additional services are notified under IGST Act.
| Sl No. | Category of supply of services | Supplier of Service | Recipient of service |
| 01 | 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 a non-taxable territory. | Any person located in the taxable territory other than non-taxable online recipient. |
| 02 | 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 a non-taxable territory.
|
Importer, as defined in Sec 2(26) of the Customs Act,1962, located in the taxable territory. |
Rahul Grover- info@raagconsultants.com
Author Bio
rcm applicability on gta – transport services and only to advocate professional services (as of our finance minister), the burden of gst is kept on receiver of service is irrational, biased, detrimental to entire indian economy – required to be challenged in advance rulings under gst and courts of law.
Once rcm scrapped there cannot be any further section 9(3) or 9 (4) in existence. no rcm means all are required get registered and follow gst provisions. this kind of lopsided web based controlling of entire govt (centre & state ) indirect system of taxation in hands of the infosys/tcs etc is dangerous development. over a period govt has to surrender to the whims and fancies of dictates of these software of gstin portal companies and all higher educated and experienced directorates and commissionaires of taxation will be mute spectators and public/businessmen in general will be mute spectators.
SOFTWARE IMPORTED BY A REGISTERED INDIAN CO. UNDER GST FROM FOREIGN CO., WHETHER THE INDIAN CO, IS LAIBLE TO PAY GST.
” Provided that such receipt shall not be more than Rs. 5,000 per day”. the said provisio has been deleted vide Notif: 38/2017.
MR Rahul- Can you Please elaborate the points where you stated that in case of supplier which is located in non Taxable territory will be liable to pay GST if Recepient of service is unregistered.
Thanks In Advance
Thanks for article. Naturally it would be very helpful.
What about the rent payable on commercial premises to an unregistered owner in the different state, by a registered business entity?
Rent amount is 15,000/- per month.
IS RCM applicable on the Office rent and other professional services we are hiring from unregistered Music Professionals, like Singers, Writers Musicians,Programmers Online promotion Agencies for our Audio Visual Production Works from October 2017 onwards
Is RCM applicable on Office Rent and the Professional Services we are hiring from Musicians Writers , PR Agencies for online promotions fro our Audio Visual Productions
I have gone thro the article and is found very educative and helpful to the concerned tax payers and tax consultants.
However, one problem has arisen among some of the tax payers. They were required to pay IGSt in cash. But inadvertently made cash payment of tax as CGSt and SGST. As the buyer was not getting credit of such tax paid, the seller had to pay again tax of IGST. These tax payers also made one more mistake. As the payment was made as CGST & SGST, the return in Form 3B was also filed incorrectly showing liability as CGST & SGST. The nature of business of these dealers is such that they may not have any future tax liability as CGST & SGST. Therefore, the problem is that how these dealers can get refund ? I feel that this issue needs to be taken by TAXGuru and dealt with.