Reverse Charge Mechanism Under GST Complete Details With Example

GST Reverse Charge:- GST is imposed upon the goods and services which are transported from one place to another in India and it is important for every businessman in India to apply for a GST because it is one of the most important taxes that you will have to file if you are taking into concentration any type of financial activities in the country. You can check out the details related to GST Reverse Charge given below and we will also share with you all the details of the Mechanism Explained In Detail with Examples. Check out the details related to the applicability of the GST and other explanations given below.

GST Reverse Charge 2023

GST is also known as the goods and services tax which is imposed upon the businesses taken into consideration in India and in between the different states available in India. All of the businesses which are going on in this country will have to pay and apply for the GST as per the number of profits that they are taking into account by doing their business from one place to another. GST reverse charge mechanism is the mechanism in which the receipt of goods or services becomes liable to pay the tax, in simpler words the charge of the GST will get reversed under the reverse charge mechanism. The receiver of the goods and services will have to pay the GST to the Government in terms of the GST Reverse Charge.

GST Return 

Applicability Of GST Reverse Charge

GST Reverse Charge will be applicable in different types of scenarios and you can take into concentration the following scenarios to apply for a reverse charge:-

• Supply of certain goods and services specified by the CBIC
  • As per the powers conferred in section 9(3) of CGST Acts, the CBIC has issued a list of goods and services on which reverse charge is applicable.
• Supply from an unregistered dealer to a registered dealer
  • Section 9(4) of the CGST Act states that if a vendor is not registered under GST and supplies goods to a person registered under GST, then reverse charge would apply. This means that the GST will have to be paid directly by the receiver instead of the supplier. The registered buyer who has to pay GST under reverse charge has to do self-invoicing for the purchases made.
  • In intra-state purchases, CGST and SGST have to be paid under a reverse charge mechanism (RCM) by the purchaser. Also, in the case of inter-state purchases, the buyer has to pay the IGST. The government notifies the list of goods or services on which this provision gets attracted from time to time.
  • In the real estate sector, the government notified that the promoter should buy inward supplies to the extent of 80% from registered suppliers only. Suppose the purchases from registered dealers shortfall 80%, then the promoter should GST at 18% on the reverse charge to the extent short of 80% of inward supplies. However, if the promoter purchases cement from an unregistered supplier, he must pay tax at 28%. This calculation is to be done irrespective of the 80% calculation.
  • The promoter is liable to pay GST on a reverse charge basis on TDR or floor space index (FSI) supplied on or after 1st April 2019. Even if a landowner is not engaged in a regular business of land-related activities, transfer of development rights by such an individual to the promoter is liable to GST as it is considered as supply of service under section 7 of CGST Act. Also, in case of outward supply of TDR by one developer to another, GST is applicable at 18% on reverse charge.
• Supply of services through an e-commerce operator
  • All types of businesses can use e-commerce operators as an aggregator to sell products or provide services. Section 9(5) of the CGST Act states that if a service provider uses an e-commerce operator to provide specified services, the reverse charge will apply to the e-commerce operator and he will be liable to pay GST. This section covers the services such as:
    • Transportation services to passengers by a radio-taxi, motor cab, maxi cab and motorcycle. For example – Ola, Uber.
  • Providing accommodation services in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through an electronic commerce operator is liable for registration due to turnover exceeding the threshold limit. For example – Oyo and MakeMyTrip.
  • Housekeeping services, such as plumbing and carpentering, except where the person supplying such services through electronic commerce operators are liable for registration due to turnover beyond the threshold limit. For example, Urban Company provides the services of plumbers, electricians, teachers, beauticians etc. In this case, Urban Company is liable to pay GST and collect it from the customers instead of the registered service providers.
  • Also, suppose the e-commerce operator does not have a physical presence in the taxable territory. In that case, a person representing such an electronic commerce operator will be liable to pay tax for any purpose. If there is no representative, the operator will appoint a representative who will be held liable to pay GST.

Online GST Payment

Time of Supply Under RCM

The reverse charge will be taken into concentration through the following time of supply details:-

• Time of supply in case of goods
  • In case of reverse charge, the time of supply for goods shall be the earliest of the following dates:
    • the date of receipt of goods
    • date of payment
    • the date immediately after 30 days from the date of issue of an invoice by the supplier
    • If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.
• Time of supply in case of services
  • In case of reverse charge, the time of supply shall be the earliest of the following dates:
    • The date of payment
    • The date immediately after 60 days from the date of issue of invoice by the supplier
    • If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

FAQs For GST Reverse Charge