Skip to main content

Reverse Charge under GST

1. What is Reverse Charge?

Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.

2. When is Reverse Charge 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.

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.

 

3. Time of Supply under Reverse Charge

A. Time Of Supply in case of Goods

In case of reverse charge, the time of supply shall be the earliest of the following dates:

  • the date of receipt of goods
  • the 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.

*This point is no more applicable based this Notification No. 66/2017 – Central Tax issued on 15.11.2017

Illustration:

  1. Date of receipt of goods 15th May 2018
  2. Date of invoice 1st June 2018
  3. Date of entry in books of receiver 18th May 2018

The Time of supply of service, in this case, will be 15th May 2018

B. 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.

Illustration:

  1. Date of payment 15th July 2018
  2. Date immediately after 60 days from the date of issue of invoice (Suppose the date of invoice is 15th May 2018, then 60 days from this date will be 14th July 2018)
  3. Date of entry in books of receiver 18th July 2018

The Time of supply of service, in this case, will be 14th July 2018

4. What is Self Invoicing?

Self-invoicing is to be done when you have purchased from an unregistered supplier AND such purchase of goods or services falls under reverse charge.

This is due to the fact that your supplier cannot issue a GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case, becomes necessary.

Labels:

Comments

Post a Comment

Popular posts from this blog

What is e Way Bill? E waybill Rules & Generation Process

1. What is an eWay Bill? EWay Bill is an Electronic Way bill for movement of goods to be generated on the eWay Bill Portal. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs. 50,000 (Single Invoice/bill/delivery challan) without an e-way bill that is generated on ewaybillgst.gov.in Alternatively, Eway bill can also be generated or cancelled  through SMS , Android App and by site-to-site integration through API. When an eway bill is generated, a unique Eway Bill Number (EBN) is allocated and is available to the supplier, recipient, and the transporter. 2.When Should eWay Bill be issued?   eWay bill will be generated when there is a movement of goods in a vehicle/ conveyance of value more than Rs. 50,000( either each Invoice or in (aggregate of all Invoices in a vehicle/ Conveyance) #  )  – In relation to a ‘supply’ For reasons other than a ‘supply’ ( say a return) Due to inward ‘supply’ from an unregistered person ...
Post a Comment
Read more

GSTR-1 – Return Filing, Format, Eligibility & Rules

Basics of GSTR-1 a. What is GSTR-1? GSTR-1 is a monthly or quarterly return that should be filed by every registered dealer. It contains details of all outward supplies i.e sales. The return has a total of 13 Sections. b. When is GSTR-1 due?   The due dates for GSTR-1 are based on your turnover. Businesses with sales of upto Rs. 1.5 crore will file quarterly returns. Other taxpayers with sales above Rs. 1.5 crore have to file monthly return. Annual Turnover up to Rs 1.5 crore can opt for quarterly filing Quarter Due date Oct-Dec 2018 31st January 2019 Jan- Mar 2019 30th April 2019 Monthly GST Return Annual Turnover of more than Rs 1.5 crore must file monthly Period Dates December 2018 11th January 2019 January 2019 11th February 2019 February 2019 11th March 2019 March 2019 11th April 2019   c. Who should file GSTR-1? Every registered person is required to file GSTR-1 irrespective of whether there are any transactions during the month or not. The following registered persons a...
2 comments
Read more

GSTR-3B : Return Filing, Format, Eligibility, Rules, Due Dates

What is GSTR 3B? The GSTR-3B is a consolidated summary return of inward and outward supplies that the Government of India has introduced as a way to relax the requirements for businesses that have recently transitioned to GST. Since a lot of small and medium businesses have been using manual accounting methods, filing returns within the July 2017 deadlines would be difficult for many of these businesses. Hence, from July 2017 to June 2018, tax payments will be based on a simple return called the GSTR-3B.  When to file GSTR-3B? The GSTR-3B for a particular month should be filed by the 20th of the following month. For example, GSTR-3B for July should be filed by the 20th of August, and the GSTR-3B for the month of August should be filed by the 20th of September and so on. This deadline applies to every month till June 2018. Prerequisites for filing GSTR 3B The GSTR-3B form should be submitted by any business that is liable to file the monthly returns  GSTR-1 ,  GSTR-2 ...
3 comments
Read more