Reverse Charge Mechanism (RCM) under GST further Deferred/ Suspended till 30 Sept. 2019: CBIC Notifications
Registration:
A person who is required to pay tax under reverse charge has to compulsorily register under GST and the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states except J & K) is not applicable to them.
Input tax credit (ITC):
A supplier cannot take ITC of GST paid on goods or services used to make supplies on which recipient is liable to pay tax.
Time of Supply:
The Time of supply is the point when the supply is liable to GST. One of the factor relevant for determining time of supply is the person who is liable to pay tax. In reverse charge, recipient is liable to pay GST. Thus time of supply for supplies under reverse charge is different from the supplies which are under forward charge.
In case of supply of goods, time of supply is earliest of –
- Date of receipt of goods; or
- Date of payment as per books of account or date of debit in bank account, whichever is earlier; or
- The date immediately following thirty days from the date of issue of invoice or similar other document.
In case of supply of services, time of supply is earliest of –
- Date of payment as per books of account or date of debit in bank account, whichever is earlier; or
- The date immediately following sixty days from the date of issue of invoice or similar other document.
Compliances in respect of supplies under reverse charge mechanism:
- As per section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules, 2017, every tax invoice has to mention whether the tax in respect of supply in the invoice is payable on reverse charge. Similarly, this also needs to be mentioned in receipt voucher as well as refund voucher, if tax is payable on reverse charge.
- Maintenance of accounts by registered persons: Every registered person is required to keep and maintain records of all supplies attracting payment of tax on reverse charge
- Any amount payable under reverse charge shall be paid by debiting the electronic cash ledger. In other words, reverse charge liability cannot be discharged by using input tax credit. However, after discharging reverse charge liability, credit of the same can be taken by the recipient, if he is otherwise eligible.
- Invoice level information in respect of all supplies attracting reverse charge, rate wise, are to be furnished separately in the table 4B of GSTR-1.
- Advance paid for reverse charge supplies is also leviable to GST. The person making advance payment has to pay tax on reverse charge basis.
Supplies of goods under reverse charge mechanism:
| S.No. |
description of supply of goods |
Supplier of goods |
supplier of goods |
| 1 |
Cashew nuts, not shelled or peeled |
Agriculturist |
Any registered person |
| 2 |
Bidi wrapper leaves (tendu) |
Agriculturist |
Any registered person |
| 3 |
Tobacco leaves |
Agriculturist |
Any registered person |
| 4 |
Silk yarn |
Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn |
Any registered person |
| 5 |
Raw cotton |
Agriculturist |
Any registered person |
| 6 |
Supply of lottery |
State Government, Union Territory or any local authority |
Lottery distributor or selling agent |
| 7 |
Used vehicles, seized and confiscated goods, old and used goods, waste and scrap |
Central Government, State Government, Union territory or a local authority |
Any registered person |
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Supplies of services under reverse charge mechanism:
| S.No.
| Description of supply of service |
Supplier of service |
Recipient of service |
| 1 |
Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient. |
Any person located in a non-taxable territory |
Any person located in the taxable territory other than non-taxable online recipient. |
| 2 |
GTA Services |
Goods Transport Agency (GTA) who has not paid integrated tax at the rate of 12% |
Any factory, society, cooperative society, registered person, body corporate, partnership firm, casual taxable person; located in the taxable territory |
| 3 |
Legal Services by advocate |
An individual advocate including a senior advocate or firm of advocates |
Any business entity located in the taxable territory |
| 4 |
Services supplied by an arbitral tribunal to a business entity |
An arbitral tribunal |
Any business entity located in the taxable territory |
| 5 |
Services provided by way of sponsorship to anybody corporate or partnership firm |
Any person |
Any body corporate or partnership firm located in the taxable territory. |
It means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.
No, reverse charge applies to supplies of both goods and services, as notified by the Government on the recommendations of the GST Council.
In case of receipt of supply from an unregistered person, the registered person who is receiving goods or services shall be liable to pay tax under reverse charge mechanism.
Yes. The definition of input tax includes the tax payable under reverse charge mechanism.
Yes, the recipient can take ITC. The condition of payment of consideration to along with tax within 180 days from the date of issue of invoice is not applicable where tax is payable on reverse charge basis.
No, even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se. Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism on such purchases.
Yes, as the sale is for consideration and is in the course or furtherance of business of such unregistered supplier.
No, suppliers who are making only those supplies on which recipient is liable to discharge GST under RCM are exempted from registration.
The recipient receiving supplies from unregistered supplier will have to issue invoice on self and pay tax. In other words, the recipient receiving supplies, which are subject to reverse charge, from a registered person need not issue a tax invoice.
He will have to pay GST on Rs. 6000/-. Exemption is available only if the value of purchases per day is less than Rs. 5000/-.
It depends on the nature of charges deducted.
The place of supply is outside India but as the supplier is located in India, it is a case of inter-State supply and subject to IGST. It will be zero rated if the sale proceeds are realized in convertible foreign exchange.
Yes, GTA can carry the goods. GST on GTA services is liable to be paid on RCM basis by the recipient. The supply of services of goods transport by road transporter other than a GTA and a courier is exempted under Notification No. 9/2017- Central Tax (rate).
Re-imbursement is an expense in the course or furtherance of business and if the same is against a taxable supply taken from an unregistered supplier, RCM will apply.
It means the liability to pay tax is on the recipient of supply of goods and services instead of the supplier of such goods or services in respect of notified categories of supply.
No, reverse charge applies to supplies of both goods and services, as notified by the Government on the recommendations of the GST Council. Notification no. 4/2017-Central Tax (Rate) and 13/2017- Central Tax (Rate) both dated 28/06/2017 have been issued. Similar notifications have been issued under IGST Act also. Reverse charge also applies to supplies received by a registered person from unregistered persons. However, the provision of reverse charge liability on supplies received from unregistered persons, as provided in sections 9 (4) and 5 (4) of the CGST Act and the IGST Act. respectively, have been kept in abeyance till 31.03.2018
The time of supply will be the earliest of the following dates:
- date of receipt of goods; or
- date on which payment is made; or
- the date immediately following 30 days from the date of issue of invoice by the supplier.
The time of supply will be the earlier of the following dates: a) date on which payment is made; or b) the date immediately following sixty days from the date of issue of invoice by the supplier.
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