I. Definition of Reverse Charge
(98) 'reverse charge' means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;
Thus in reverse charge recipient of goods or services or both is liable to pay to pay GST.
II The provisions relating to Reverse charge in the GST Act
9(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
Essential ingredients :
1. It shall be recommended by GST Council .List of services under Reverse charge is as follows
2. The Central or State Government shall issue notification specifying the categories of supply of goods or services or both and the person liable to pay the tax. Thus the issuance of notification is a mandatory condition.
3. The recipient of service or goods will be considered as a person liable to pay GST.
The recipient steps into the shoes of the person making the supply. Where tax is payable on reverse charge basis then in such case who is liable to pay on reverse charge has to compulsorily obtain registration irrespective of their turnover. i.e even if his turnover does not exceed 20 lakh still he is liable to register. The registration is to be obtained in Form GST-REG-1
However as per Notification No. 5/2017 - Central Tax the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act.
4. Reverse charge is applicable in case of supply of goods also.
III Supply from an unregistered person
In addition to section 9(3) of the GST Act , the section 9(4) of the GST Act states that in case of supply of taxable goods or services or both from an supplier who is not registered then in such case tax will be paid by the recipient of goods or services or both. In this case the recipient is required to prepare invoice as stated in section 31(3)(f) of the GST Act.
As per Sec 9(4) of CGST Act, GST has to be discharged on Reverse charge basis on purchase of goods/services from unregistered persons. In a relief to the assessee, the government has exempted the following supplies from GST under reverse charge vide Notification No.8/2017-Central tax rate.
- Exemption is available only for intra-state supplies - Thus location of supplier and place of supply should be in the same state.
- The exemption is eligible only when the total value of supplies of goods or services or both received from any or all the unregistered persons does not exceed Rs. 5,000 in a day. If the value exceeds Rs. 5000 per day then the GST will be payable on the entire value. Eg. If a person buys goods worth Rs. 2000/- and Rs. 3500/- from two unregistered supplier in a day, then GST will be paid on the entire value of Rs. 5500/- under RCM by the buyer.
- Also, an amendment has been made in the invoice rules to provide that a single invoice can be prepared at the month end for all reverse charge supplies ( other than those covered by the exemption explained above).
IV. Return filing in case of Reverse Charge -
For Return filing see this attached video
Supplies from Registered Person:
- The supplier will show supplies of goods or services which attract reverse charge in table 4B of GSTR-1.
- Such details will be auto populated in table 4 of Part A of GSTR-2A of the recipient of goods or services.
- Recipient of goods or services will have following option after auto-population in GSTR-2A
c. Modify (if information provided by supplier is incorrect), or
d. Keep the transaction pending for action (if goods or services have not been received)
If recipient accepts or modifies then such details of supplies will be taken to table 4A of GSTR -2 .
Supplies from Unregistered Person: In such recipient himself will prepare invoice as per the invoicing provisions and rules which will be reflected in table 4B of GSTR-2 by the recipient.
Import of Services
- In case of import of services recipient himself will prepare invoice as per the invoicing provisions and rules which will be reflected in table 4C of GSTR-2 by the recipient.
- In this table GSTIN will be of the recipient himself.
For reverse charge provisions see this attached video