{"id":5405,"date":"2020-03-26T20:09:16","date_gmt":"2020-03-26T14:39:16","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=5405"},"modified":"2020-12-07T16:29:03","modified_gmt":"2020-12-07T10:59:03","slug":"analysis-of-reverse-charge-mechanism-under-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/","title":{"rendered":"Detailed Analysis of Reverse Charge Mechanism under GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Typically, the supplier of goods or services is accountable for\npaying GST. Though, in specified circumstances like imports and other notified\nsupplies, the obligation may be swift to the recipient under the reverse charge\nmechanism. <\/p>\n\n\n\n<p>Unlike normal GST payment process, the recipient of the supplies is the one who is entitled to pay tax under the reverse charge mechanism. The following diagram helps you understand the very nature of the tax flow that occurs under reverse charge. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"653\" height=\"284\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-53.png\" alt=\"GST payment process\" class=\"wp-image-5406\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-53.png 653w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-53-300x130.png 300w\" sizes=\"(max-width: 653px) 100vw, 653px\" \/><\/figure><\/div>\n\n\n\n<ul><li>If an unregistered vendor supplies\ngoods to a buyer who is registered under GST, then the Reverse Charge would be\napplicable to that buyer. In this case, the registered dealer has to do\nself-invoicing for the purchases made.<\/li><li>For Inter-state purchases, the\nbuyer has to deal with IGST. <\/li><li>Meanwhile, for Intra-state\npurchases, the SGST and CGST have to be paid under RCM by the purchaser.<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/#Reverse_Charge_Mechanism_Outlines_In_The_Law\" >Reverse\nCharge Mechanism Outlines In The Law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/#Example_No1\" >Example No.1:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/#Example_No_2\" >Example No. 2:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/#Compliances_Related_To_Reverse_Charge_Mechanism\" >Compliances Related To Reverse Charge Mechanism<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reverse_Charge_Mechanism_Outlines_In_The_Law\"><\/span><strong>Reverse\nCharge Mechanism Outlines In The Law<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Reverse charge intends the\nobligation to pay tax is on the recipient of the supply of goods or services\nrather than the supplier. There are two types of reverse charge outlines given\nin law. First is subjected to the nature of supply and\/or nature of the\nsupplier.<\/li><\/ul>\n\n\n\n<ul><li>This outline embraced by <strong>section 9 (3) of the CGST\/SGST (UTGST) Act<\/strong>\nand <strong>section 5 (3) of the IGST Act<\/strong>.\nThe following outline covered by section 9 (4) of the CGST\/SGST (UTGST) Act and\nsection 5 (4) of the IGST Act under which chargeable supplies by any person\n(unregistered) to a person (registered) is covered. <\/li><\/ul>\n\n\n\n<ul><li>Under <strong>section 9(3), CGST \/ SGST (UTGST) Act, 2017 \/ section 5(3)of IGST Act, 2017<\/strong><sup><a href=\"http:\/\/www.cbic.gov.in\/resources\/\/htdocs-cbec\/gst\/51_GST_Flyer_Chapter12.pdf\"><strong>[1]<\/strong><\/a><\/sup>, the Government may, under the directions of the Council, by information, define classes of supply of goods or services, the tax on which will repay on reverse charge.<\/li><\/ul>\n\n\n\n<ul><li>All the provisions enlisted in\nthis Act will apply to such recipient for paying the tax in connection to the\nsupply of such goods or services or both. <\/li><\/ul>\n\n\n\n<ul><li>Likewise, section 9(4) of CGST \/\nSGST (UTGST) Act, 2017 \/ section 5(4) of IGST Act, 2017 grants that the tax in\nregard of the supply of taxable goods or services or both by a supplier, who is\nnot registered, to a registered person, will be repaid by such person on the\nbasis of Reverse Charge.&nbsp; <\/li><\/ul>\n\n\n\n<ul><li>The provisions of this Act will\napply to such recipient liable for paying the tax concerning the supply of such\ngoods or services. <\/li><\/ul>\n\n\n\n<ul><li>Hence, wherever a registered\nperson obtains supplies from an unregistered supplier, he has to pay GST based\non Reverse Charge. However, there is a scope of the exemption when the value of\nsupplies of goods or service fall under five thousand rupees. (Notification\n8\/2017-Central Tax (Rate) dated 28.06.2017). <\/li><\/ul>\n\n\n\n<ul><li>As per vide notification\nno.38\/2017-Central Tax (Rate) dated 13.10.2017, all classes of registered\npersons subjected to an exemption from the provisions of Reverse Charge under\n9(4) of CGST \/ SGST (UTGST) Act, 2017 \/ section 5(4) of IGST Act, 2017. <\/li><\/ul>\n\n\n\n<ul><li>Section 9(4), CGST Act, 2017, shall not be fit to supplies made to a TDS deductor. Thus, Government entities 87 who are TDS Deductors under Section 51 of the CGST Act, 2015, need not pay GST under Reverse Charge in case of procurements from unregistered suppliers. <\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-rate-on-indian-economy\/\">Pragmatic Impact of GST Rate on Indian Economy\n<\/a><\/mark><\/p>\n\n\n\n<p><strong><em>The following examples can help you understand the technicality\nrelated to the reverse charge mechanism. <\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Example_No1\"><\/span>Example <strong>No.1: <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Mr X buys stationery worth Rs. 200\/- from ABC Stationery, which\nis not listed under GST.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Analysis:<\/strong><\/h3>\n\n\n\n<ul><li>A registered person (Advocate Mr\nX) availed the services from an unregistered person (ABC Stationary). <\/li><li>The aggregate value didn\u2019t exceed\nthan Rs. 5,000\/- limit in a day. <\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Reasoning:<\/strong><\/h3>\n\n\n\n<p><strong><em>The reverse Charge under GST applicable to both the party or\nnot?<\/em><\/strong><\/p>\n\n\n\n<p>Reverse charge mechanism under GST clearly states that recipient of supply should be liable to pay tax, in the given case, Mr X is obligated to pay GST Reverse charge but &#8211; <\/p>\n\n\n\n<p>Since the aggregate value of supplies has not exceeded Rs.\n5,000\/-, Mr X in no circumstance shall be entitled to pay GST Reverse Charge. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Example_No_2\"><\/span><strong>Example No. 2: <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>XYZ Transport services provide Goods Transport services to Mr X\n(an unregistered dealer of Delhi). MR. X availed the services from XYZ\nTransport services, worth Rs 1000\/-. Which of the two parties are entitled to\npay a reverse charge under GST? <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Analysis:<\/h3>\n\n\n\n<ul><li>Mr X (an unregistered dealer of\nDelhi) availed the services from XYZ Transport services. <\/li><li>The aggregate value of the trade\nis worth Rs 1000\/-<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Reasoning: <\/h3>\n\n\n\n<p>Since Mr X is conducting the trade without GST framework, it\nshould be the one who needs to get registered first. To do so, Mr X needs to\nobtain GSTIN in the first place and then pay tax on Reverse Charge under GST on\nthe given trade. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Registration: <\/h3>\n\n\n\n<p>A person who is obligated to repay tax under Reverse Charge has to register under <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST<\/strong><\/a> imperatively, and the threshold limit does not apply to them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Time of<\/strong> <strong>Supply<\/strong><\/h3>\n\n\n\n<p>The time of supply is the point subjected to GST. One of the\nfactors related to defining the time of supply is the person who is under the\ntax liability. In reverse charge, the GST is applicable to the recipient.\nTherefore, the time of supply for supplies is different from the supplies which\ncome under the forward charge.<\/p>\n\n\n\n<p>As per Section 12(3) CGST Act, 2017 in case of supplies of goods\nliable to be paid based on reverse charge, the time of supply will be the\nearliest of the given dates, viz:<\/p>\n\n\n\n<ul><li>Date related to the receipt of goods; or<\/li><li>Date of debit in a bank account. <\/li><li>The date immediately following thirty days from the date of issue of invoice or similar other documents.<\/li><\/ul>\n\n\n\n<p>As per Section 12(3) CGST Act, 2017 in case of supplies of\nservices liable to be paid based on reverse charge, the time of supply will be\nthe earliest of the given dates, viz: <\/p>\n\n\n\n<ul><li>Date of payment in line with the books of account or date of debit inline with the bank account, whichever is earlier; or<\/li><li>The date immediately following 60 days from the date of issue of invoice or similar other documents.<\/li><\/ul>\n\n\n\n<p>Where it is not possible to determine the time of supply using\nthe above methods, time of supply would be the date of entry in the books of\naccount of the recipient.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Compliances_Related_To_Reverse_Charge_Mechanism\"><\/span>Compliances Related To Reverse Charge Mechanism<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Every tax invoice displays the info regarding the tax in the invoice, payable on Reverse Charge. Likewise, the same has to be done with receipt voucher as well as refund voucher, if tax is confined around the reverse charge.<\/li><li>The registered person must keep and maintain the records of supplies that attracts tax treatment under the Reverse Charge. <\/li><li>Any amount that falls in the category of reverse charge shall be paid by electronic cash ledger. In other words, reverse charge liability is non-dischargeable via an input tax credit.<\/li><li>Advance paid for Reverse Charge supplies also come under GST treatment. The person who makes the advance payment is subjected to tax based on Reverse Charge. <\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gst-penalty-offences-and-appeals-under-gst\/\">GST: Penalty, Offences and Appeals Under GST Act 2017\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Typically, the supplier of goods or services is accountable for paying GST. Though, in specified circumstances like imports and other notified supplies, the obligation may be swift to the recipient under the reverse charge mechanism. Unlike normal GST payment process, the recipient of the supplies is the one who is entitled to pay tax under [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":5465,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16,152],"tags":[425],"acf":{"service_id":"132"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":8349,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5405"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=5405"}],"version-history":[{"count":23,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5405\/revisions"}],"predecessor-version":[{"id":21259,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/5405\/revisions\/21259"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/5465"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=5405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=5405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=5405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}