What is Reverse Charge?

Reverse charge is a mechanism where the recipient of the goods and/or services is liable to pay GST instead of the supplier.

What is Reverse Charge?

Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.

2. When is Reverse Charge Applicable?

A. Supply from an Unregistered dealer to a Registered dealer

If a vendor who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply. This means that the GST will have to be paid directly by the receiver to the Government instead of the supplier.

The registered dealer who has to pay GST under reverse charge has to do self-invoicing for the purchases made.

For Inter-state purchases the buyer has to pay IGST. For Intra-state purchased CGST and SGST has to be paid under RCM by the purchaser.

Deferment.

6th Aug 2018: Reverse Charge Mechanism (in case of supplies made by unregistered persons to registered persons) deferred to 30th Sept 2019.Previously, this provision was applicable from 1st Oct 2018.

28th May 2018: List of items under RCM updated to include the Priority Sector Lending Certificate by a GST registered person to another GST registered person now falls under Reverse charge via CGST Rate Notification.

Courtesy: Clear Tax