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RCM(Reverse Charge Mechanism) under GST

CA Rahul Mittal 
on 23 June 2020

LinkedIn


Normal GST Payment Process

BACKGROUND OF REVERSE CHARGE MECHANISM

  • Reverse Charge Mechanism was first introduced in Service Tax Law.
  • Now, the Government has incorporated RCM in GST.
  • Government has notified not only supply of certain services but also supply of certain goods under RCM.
RCM(Reverse Charge Mechanism) under GST

OBJECTIVE OF REVERSE CHARGE MECHANISM

  • Safeguard the interest of Revenue
  • Administrative convenience of Government

GST Payment in case of reverse Charge

 

Statutory Provision

Section 2(98) of the CGST Act, 2017

"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 sub-section (4) of Section 5 of the Integrated Goods and Services Tax Act.

Section 9(3) of the CGST Act, 2017

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.

 

Section 5(3) of the IGST Act, 2017

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

Comprehend two types of reverse charge scenarios in GST

Section 9(3) of the CGST/SGST/UTGST Act and Section 5(3) of the IGST Act Section 9(4) of the CGST/SGST/UTGST Act and Section 5(4) of the IGST Act
On the nature of supply and/or nature of supplier On the nature of supply
  Supply received by a class of registered persons
Supply made by unregistered supplier

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