GST-REVERSE-CHARGE-MECHANISM-converted-merged.pdf
- 1. BY – MR.DILIP KUMAR GUPTA GST-REVERSE CHARGE MECHANISM
- 3. INTRODUCTION In some cases , GST is payable by the recipient of goods and services or both. The collection mechanism when recipient is made liable to pay tax is called reverse charge mechanism (RCM). As per section 2(98) of CGST act, “The reverse charge means the liability to pay tax by the recipient of supply goods /services/both instead of supplier of goods/services/both under section 9(3) & 9(4) of the act or under section 5(3) & 5(4) of IGST act.
- 4. FEATURES OF RCM: 1). EXPANDED SCOPE: In the GST law , the scope of reverse charge is expanded to include goods that may be notified, even if the supplier is registered. 2). NO PARTIAL REVERSE CHARGE: Under service tax laws , there was scheme of partial reverse charge of joint charge on supplier and recipient . In GST , the concept has been discontinued. 3). COMPULSORY REGISTRATION: The person who are required to pay tax under reverse charge are required to be registered ,irrespective of the threshold limit specified in section 22(1). 4). CONCESSIONAL COMPOSITE RATE NOT APPLICABLE: the composition suppliers being recipients of supplies on which tax is payable on reverse charge basis , will have to remit tax at the applicable rates , and not the concessional composition rates. 5). NOT INCLUDED IN AGGREGATE TURNOVER
- 5. FORWARD CHARGE VS REVERSE CHARGE
- 6. WHEN IS RCM APPLICABLE? A. Supply from an Unregistered dealer to a Registered dealer If a vendor who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply . This means that the GST will have to be paid directly by the receiver to the Government instead of the supplier. The registered dealer who has to pay GST under reverse charge has to do self-invoicing for the purchases made. For Inter-state purchases the buyer has to pay IGST. For Intra-state purchased CGST and SGST has to be paid under RCM by the purchaser.
- 7. B. Services through an e-commerce operator If an e-commerce operator supplies services then reverse charge will be applicable to the e-commerce operator. He will be liable to pay GST. For example, urbanClap provides services of plumbers, electricians, teachers, beauticians etc. UrbanClap is liable to pay GST and collect it from the customers instead of the registered service providers. If the e-commerce operator does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST. C. Supply of certain goods and services specified by CBEC CBEC has issued a list of goods and a list of services on which reverse charge is applicable.
- 8. MODE OF PAYMENT UNDER RCM As per section 49(4),the amount available in the electronic credit ledger may be used for making payment towards output tax under CGST/IGST. Section 2(82) of CGST Act specifically excluded tx payable on reverse charge basis in “Output tax”. Therefore, when section 49(4) is read with section 2(82),it becomes clear that the GST under reverse charge cannot be paid by utilizing input tax credit i.e the electronic credit ledger cannot be utilized for it. Hence ,when gst is payable under reverse charge, it should be paid by cash only. It means it will be paid through electronic cash ledger only.
- 9. OUTWARD SUPPLY VS INWARD SUPPLY UNDER RCM S.NO BASIS OUTWARD SUPPLY UNDER RCM INWARD SUPPLY UNDER RCM 1. Tax liability Supplier is not liable to pay tax on such outward supply. Recipient shall be liable to pay tax on such inward supply. 2. Related input tax credit The supplier is not entitled to avail ITC on such outward supply. After payment of GST, the recipient may avail ITC if he is otherwise fulfilling all conditions related to availment of ITC. 3. Aggregate supply As per section 2(6),such supply shall be considered as a part of aggregate turnover. Shall not be considered in part of aggregate turnover. 4. Flat rate taxation scheme If supplier is composite supplier , he shall not be liable to pay gst on such outward supply. If recipient is composite supplier, he will be liable to pay full gst on inward supply under reverse charge.
- 10. PROVISIONS UNDER GST FOR REVERSE CHARGE Under CGST act ,2017 there are two provisions given under section 9(3) and 9(4) of the act relating to reverse charge. There are two types of reverse charge: REVERSE CHARGE UNDER NOTIFICATION{ section 9(3)} REVERSE CHARGE UNDER ACT{section 9(4)}
- 11. SECTION 9(3) VS SECTION 9(4)
- 12. NOTIFIED GOODS UNDER REVERSE CHARGE i) Notified goods The Central Government on the recommendation of the GST Council notified certain goods vide notification number 04/2017-Central Tax (Rate), dated 28.06.2017 tax liability on supply of which shall be paid by the recipient (i.e. reverse charge) of such goods in case of INTRA STATE SUPPLY. The notification has been effective from 01.07.2017. SI . NO DESCRIPTION OF SUPPLY OF GOODS SUPPLIER OF GOODS RECIPIENT OF GOODS 1. CASHEW NUTS (NOT SHELLED AND PEELED) AGRICULTURIST ANY REGISTERED PERSON 2. BIDI WRAPPAR LEAVES (TENDU) AGRICULTURIST ANY REGISTERED PERSON 3. TABACCO LEAVES AGRICULTURIST ANY REGISTERED PERSON 4. SILK YARN ANY PERSON WHO MANUFACTURES SILK YARN FROM RAW SILK OR SILK WORM COCOONS FOR SUPPLY OF SILK YARN ANY REGISTERED PERSON 5. SUPPLY OF LOTTERY STATE GOVERNMENT , UNION TERRITORY OR ANY LOCAL AUTHORITY LOTTERY DISTRIBUTOR OR SELLING AGENT
- 13. DEFAULT REVERSE CHARGE – SECTION 9(4) OF CGST ACT As per section 9(4), “The GST in respect of supply of taxable goods and services or both by a supplier , who is not registered , to a registered person shall be paid by recipient on reverse charge basis.” This provision applies to any kind of taxable goods and / or services supplied by unregistered person & a registered person.
- 14. THANK YOU!