REVERCE CHARGE/ FORWARD CHARGE

Hi Rohit,

Here’s a quick explanation about Reverse Charge Mechanism (RCM) vs Forward Charge under GST:

1. Forward Charge (Normal charge)

• The supplier charges GST on the invoice and collects it from the buyer.

• The supplier deposits GST to the government.

• Applicable when supplier is registered and supply is under normal GST rules.

2. Reverse Charge Mechanism (RCM)

• The recipient of goods/services is liable to pay GST directly to the government instead of the supplier.

• Supplier does not charge GST on invoice under RCM.

• Usually applies for specified goods/services notified by GST law or when supplier is unregistered.

Your Question:

Can someone issue a bill under Forward Charge (12%) when actually the supply is under RCM?

• No, if supply is notified under RCM, supplier should not charge GST on the invoice; the recipient has to pay GST.

• If the supplier charges GST (forward charge) when RCM is applicable, this is incorrect and can cause compliance issues for both parties.

What happens if bills are issued under both RCM and Forward Charge in Maharashtra?

• It will lead to confusion and GST mismatch:

  • Recipient might wrongly claim ITC on the tax charged by supplier even though the tax should be paid by recipient under RCM.

  • It may lead to notices or penalties from GST authorities for incorrect tax payment and filing.

• In short: Either the supplier charges GST (forward charge) OR the recipient pays under RCM, not both.

Best Practice:

• Identify the nature of supply and check GST notifications for RCM applicability.

• If RCM applies, supplier should issue invoice without GST mentioning “Tax payable by recipient under reverse charge.”

• If forward charge applies, supplier charges GST normally.