Invoice under reverse charges

Reverse Charge under GST is a very important topic. There are certain goods & services which attract reverse charge. However, this is not all.

As per Sec 9(4) of CGST Act, if a registered person purchases goods/services from an unregistered dealer (URD) then the registered taxpayer is liable to pay GST on reverse charge basis. All the provisions of the Act will apply to such recipient as if he were the person liable for paying the tax in relation to the supply of goods or services.

This provision will apply if the below conditions are met:

• There should be a supply of goods or services
• The supply should be in respect of taxable goods/services
• Supply must be by an unregistered person.
• Supply must be to a registered person
• Supply must be an intra-state supply as compulsory registration is required for inter-state sales

Purchases upto Rs. 5,000 per day from unregistered suppliers will not attract GST.  In other words, there is a reverse charge on buying from unregistered dealers if you are dealing with unregistered suppliers and making payments above Rs. 5,000.

Example:

ABC Ltd. is a registered company which has spent Rs. 7,500 on purchases from a URD. Should it pay GST via RCM (Reverse Charge Mechanism) on Rs. 1,500?

Once the limit of Rs. 5,000 in a day is crossed, the GST is payable on the entire amount of Rs. 7,500 on RCM.

Dear Ani,

Please find the attached Presentation for your all quries of GST

This provision was brought so that Registered Dealers do not get problems in their normal operation. If they would have issued Tax Invoices for every such bill, it would have affected their business.

Hence exemption was provided till Rs. 5000 per day. 

In case of import of good/service, is the exemption applicable?