reverse charge
This query is : Resolved
22 July 2017
Dear,
we have a contractor individual doing filling oil pouches and packaging along with operation & maintenance of machines for piece rate and manpower supervision under contractors only. We have to pay against pieces only.
Is it comes under Reverse charge.
Please clarify
Regards
23 July 2017
works contract is a composite or mixed supply .It comes under service.Reverse charge mechanism is applicable for both good and services in case if the supplier is unregistered.
23 July 2017
Dear Sir
please confirm under service tax act.
It is clear under GST Act
Regards
22 July 2025
Got it! Let me clarify the Reverse Charge Mechanism (RCM) for your scenario under GST and Service Tax:
Under Service Tax Act (Pre-GST):
If you are paying an individual contractor for services like filling oil pouches, packaging, and O&M of machines on a piece-rate basis, reverse charge may apply if the contractor is unregistered or falls under notified categories.
Works contract services are treated as a composite service and often covered under RCM if the service provider is unregistered.
Under GST Act (Post 1 July 2017):
Under GST, RCM applies on goods or services received from unregistered suppliers if notified by the government.
For works contract services, the GST law treats it as a composite supply of service.
If the contractor (individual) is unregistered, and the supply is notified under reverse charge (which works contract often is), then RCM will apply and the recipient (you) must pay GST on such services.
If the contractor is registered under GST, then normal forward charge applies (contractor charges GST and you pay).
Summary for your case:
Scenario Reverse Charge Applicable?
Contractor is unregistered individual Yes, RCM applies, you pay GST
Contractor is registered under GST No, contractor charges GST, you pay normal tax
Additional Notes:
The payment on piece rate doesn’t change the applicability of RCM; it depends on the registration status of the contractor and whether the service is notified under RCM.
You should check the latest government notifications on RCM applicable services under GST.
Also, ensure you comply with GST invoicing and tax payment procedures.
Under Service Tax Act (Pre-GST):
If you are paying an individual contractor for services like filling oil pouches, packaging, and O&M of machines on a piece-rate basis, reverse charge may apply if the contractor is unregistered or falls under notified categories.
Works contract services are treated as a composite service and often covered under RCM if the service provider is unregistered.
Under GST Act (Post 1 July 2017):
Under GST, RCM applies on goods or services received from unregistered suppliers if notified by the government.
For works contract services, the GST law treats it as a composite supply of service.
If the contractor (individual) is unregistered, and the supply is notified under reverse charge (which works contract often is), then RCM will apply and the recipient (you) must pay GST on such services.
If the contractor is registered under GST, then normal forward charge applies (contractor charges GST and you pay).
Summary for your case:
Scenario Reverse Charge Applicable?
Contractor is unregistered individual Yes, RCM applies, you pay GST
Contractor is registered under GST No, contractor charges GST, you pay normal tax
Additional Notes:
The payment on piece rate doesn’t change the applicability of RCM; it depends on the registration status of the contractor and whether the service is notified under RCM.
You should check the latest government notifications on RCM applicable services under GST.
Also, ensure you comply with GST invoicing and tax payment procedures.
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