GST-REVERSE-CHARGE-MECHANISM-converted-merged.pdf

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1. BY –MR.DILIP KUMAR GUPTA
GST-REVERSE CHARGE
MECHANISM

3. INTRODUCTION
Insomecases,GSTispayablebytherecipientof
goodsandservicesorboth.Thecollection
mechanismwhenrecipientismadeliabletopaytax
iscalledreversechargemechanism(RCM).
Aspersection2(98)ofCGSTact,“Thereverse
chargemeanstheliabilitytopaytaxbytherecipient
ofsupplygoods/services/bothinsteadofsupplier
ofgoods/services/bothundersection9(3)&9(4)of
theactorundersection5(3)&5(4)ofIGSTact.

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.SupplyfromanUnregistereddealertoa
Registereddealer
IfavendorwhoisnotregisteredunderGST,supplies
goodstoapersonwhoisregisteredunderGST,then
ReverseChargewouldapply.ThismeansthattheGST
willhavetobepaiddirectlybythereceivertothe
Governmentinsteadofthesupplier.
TheregistereddealerwhohastopayGSTunderreverse
chargehastodoself-invoicingforthepurchasesmade.
ForInter-statepurchasesthebuyerhastopayIGST.For
Intra-statepurchasedCGSTandSGSThastobepaid
underRCMbythepurchaser.

7. B.Servicesthroughane-commerceoperator
Ifane-commerceoperatorsuppliesservicesthenreversechargewill
beapplicabletothee-commerceoperator.Hewillbeliabletopay
GST.
Forexample,urbanClapprovidesservicesofplumbers,electricians,
teachers,beauticiansetc.UrbanClapisliabletopayGSTandcollect
itfromthecustomersinsteadoftheregisteredserviceproviders.
Ifthee-commerceoperatordoesnothaveaphysicalpresenceinthe
taxableterritory,thenapersonrepresentingsuchelectronic
commerceoperatorforanypurposewillbeliabletopaytax.Ifthere
isnorepresentative,theoperatorwillappointarepresentativewho
willbeheldliabletopayGST.
C.SupplyofcertaingoodsandservicesspecifiedbyCBEC
CBEChasissuedalistofgoodsandalistofservicesonwhich
reversechargeisapplicable.

8. MODE OF PAYMENT UNDER RCM
Aspersection49(4),theamountavailableinthe
electroniccreditledgermaybeusedformakingpayment
towardsoutputtaxunderCGST/IGST.
Section2(82)ofCGSTActspecificallyexcludedtx
payableonreversechargebasisin“Outputtax”.
Therefore,whensection49(4)isreadwithsection
2(82),itbecomesclearthattheGSTunderreversecharge
cannotbepaidbyutilizinginputtaxcrediti.ethe
electroniccreditledgercannotbeutilizedforit.
Hence,whengstispayableunderreversecharge,it
shouldbepaidbycashonly.Itmeansitwillbepaid
throughelectroniccashledgeronly.

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.
Recipientshall be liable
to pay tax on such
inward supply.
2. Relatedinput tax
credit
The supplier is not
entitled to avail ITCon
such outward supply.
After payment of GST,
the recipient may avail
ITC if he is otherwise
fulfilling all conditions
relatedto availmentof
ITC.
3. Aggregate supply
Asper section 2(6),such
supply shall be
considered as a part of
aggregate turnover.
Shall not beconsidered
in part of aggregate
turnover.
4. Flatrate taxation
scheme
If supplier is composite
supplier, he shall not be
liable to pay gston such
outward supply.
Ifrecipient is composite
supplier, he will be liable
to pay full gston inward
supply under reverse
charge.

10. PROVISIONS UNDER GST FOR REVERSE CHARGE
UnderCGSTact,2017therearetwoprovisionsgiven
undersection9(3)and9(4)oftheactrelatingto
reversecharge.Therearetwotypesofreverse
charge:
REVERSE CHARGE UNDER NOTIFICATION{
section9(3)}
REVERSECHARGEUNDERACT{section9(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
videnotification number 04/2017-Central Tax (Rate), dated 28.06.2017tax 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 WRAPPARLEAVES (TENDU) AGRICULTURIST ANY REGISTERED
PERSON
3.
TABACCOLEAVES AGRICULTURIST ANY REGISTERED
PERSON
4.
SILKYARN ANY PERSON WHO
MANUFACTURES SILK YARN
FROM RAW SILK OR SILK WORM
COCOONS FOR SUPPLY OF SILK
YARN
ANY REGISTERED
PERSON
5.
SUPPLY OFLOTTERY STATEGOVERNMENT , UNION
TERRITORY OR ANY LOCAL
AUTHORITY
LOTTERYDISTRIBUTOR
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!

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